The SP7 notes call it a novation, but then go on to describe what sounds like an insurance business transfer, since it says policyholders need to be informed (but nothing is mentioned about them needing to agree) and the deal needs to be approved by court. The September 2019 Q3x ASET also makes it sound like an IBT. Investopedia describes them as being a reinsurance arrangement which seems inconsistent with the CMP https://www.investopedia.com/terms/l/loss-portfolio-transfer.asp "If the reinsurer becomes insolvent or is unable to fulfill its obligations, the insurer will still be responsible for payments made to its policyholders." Would really appreciate some clarity around this.
Have a read of the Glossary definition of Loss Portfolio Transfer (LPT), which describes the two possibilities. The most common use of the term is probably the one described in Section 6.3 of Chapter 6 of the SP7 & SP8 Course Notes, where it is a type of 'novation' and not a type of reinsurance, which may need to be approved by a court. An insurance business transfer (IBT) is a LPT. In the UK most IBTs are called Part VII transfers (which refers to legislation which covers them - Part VII of FSMA 2000) and they require court approval. As stated in Section 5 of Chapter 12, an IBT achieves exactly the same result as a novation, but it can be effected for a large number of policies at the same time and does not require the agreement of each and every policyholder.
