When financing an insurance broker in the Netherlands, it has been common practice for years for the broker to provide security to the bank by providing a pledge on the insurance portfolio. That makes sense, because for a broker his portfolio is by far the most valuable asset of his company. However, there has been a discussion going on for years about whether it is legally possible to pledge a portfolio.
From the lower case law it can be concluded that it would not be possible, because an insurance portfolio is not a pledgeable asset. According to the banks, and according to ING Bank in the case assessed by the Supreme Court, there is a practical need for the possibility of pledging an insurance portfolio because this will benefit the financeability of the activities of an insurance intermediary. The law should therefore follow and adapt to the current practice, otherwise the loans will no longer be provided, or there will be insufficient security for the bank. The Supreme Court settled the discussion in its ruling of 6 December 2019. The ruling is briefly discussed here.
An insurance broker has business relationships with various insurers and clients. The intermediary concludes agreements with the insurers on the basis of which he is authorized to mediate in taking out insurance policies and to manage insurance policies taken out. The intermediary enters into contracts of engagement with (potential) policyholders, in which he undertakes to advise and mediate in concluding insurance contracts with insurers and to manage insurance policies taken out.
The management consists, among other things, of the collection of insurance premium and the settlement of claims of policyholders. The insurance contracts concluded through the mediation are concluded directly between the insurer and the policyholder. The contact between the insurer and the policyholder is exclusively through the intermediary. For the brokerage and management work, the intermediary receives commission fees from the insurer or reimbursements from the policyholder.
In the much discussed judgment of the Gelderland court of 4 April 2018, it was already ruled that an insurance portfolio was not was susceptible to pledging. The court reasoned as follows. "A pledge can be established on transferable assets (Article 3: 228 of the Dutch Civil Code). Assets are property or property rights (Article 3: 1 of the Dutch Civil Code).
Assuming that an insurance portfolio consists in any case of a set of agreements from which claim rights arise and to which goodwill is attached and in view of the definition in article 3: 2 of the Dutch Civil Code ("matters are the material objects susceptible to human control") it can be assumed that a insurance portfolio is not a matter of course. The question remains whether an insurance portfolio can be classified as a property right. That is complicated.
With regard to the individual building blocks from which an insurance portfolio is built up, it is clear that an agreement in itself is not a property right and therefore not a property-related legal object on which a pledge can be established. A party to an agreement may transfer its legal relationship from that agreement to a third party on the basis of Article 6: 159 of the Dutch Civil Code if the other party to the agreement cooperates with it, but the transfer of property rights under Article 3:84 of the Dutch Civil Code is not possible.
The goodwill building block can also not be regarded as property right as such. Goodwill can only be transferred via the goods to which it is linked. Conversely, claim rights arising from an agreement are property rights. A pledge may also be established on this, albeit within the limits of Sections 3: 236, second paragraph, 3:94, first paragraph and 3: 239, first paragraph of the Dutch Civil Code. "
But then the problem follows. An agreement cannot be transferred under property law, as the cooperation of the other party is required when taking over a contract. This means that an agreement cannot be pledged. Goodwill can also not be regarded as a property right, according to the Gelderland District Court.
Normally the parties first file an appeal at the Court of Appeal. In this case, the parties were only interested in the answer to the legal question, so Jump Cassation was lodged before the Netherlands Supreme Court.
In the judgment of December 6, 2019 the Supreme Court ruled as follows. The legal system assumes that only individual property or property rights can be considered good and as such can be the subject of a property law or property transaction.
The combination of agreements and goodwill that is referred to as an insurance portfolio is not an individual thing or an individual property right, even if it is regarded as a unit in the course of trade.
An insurance portfolio is therefore not a good in the sense of art. 3: 1 BW. This is not altered by the fact that individual parts of an insurance portfolio, such as claim rights, are goods, or by the fact that the portfolio as a whole represents an asset value in the course of trade and can be the subject of a obligatory legal act such as a purchase agreement.
ING Bank is fishing behind to the net. The Supreme Court of the Netherlands has decided that pledging the insurance portfolio does not fit in with the legal system of property law and the financing practice will therefore have to look definitively for another solution.
Hein Kernkamp will gladly help you further.