FSCS to compensate Alpha latent defect policyholders
The Financial Services Compensation Scheme (FSCS) is to compensate Alpha Insurance latent defect premium insurance policyholders (see FSCS webpage for Alpha customers).
The move follows the collapse of a proposed deal arranged by BCR Legal Group Ltd to provide replacement cover for Alpha’s 10-year latent defect/structural damage insurance policies.
Since May 2018, when the Danish company Alpha Insurance was declared bankrupt, FSCS has worked with BCR, the FCA, the Alpha liquidator and the Danish Guarantee Fund to try and secure replacement cover for Alpha’s latent defect/structural damage insurance policies. These policies lapsed on 11 August 2018 in accordance with Danish law. Despite the parties’ best efforts this has not been possible.
As a result, policyholders cannot be expected to wait any longer and FSCS is to pay premium refund compensation to around 14,000 policyholders directly and cheques will be posted in the coming weeks. FSCS is also writing to the remaining 6,500 policyholders with instructions on what steps the policyholders must take to submit their claim. There is no need for any Alpha customers to contact FSCS, as all relevant policyholders can be assured that FSCS will contact them within the next two weeks.
FSCS’s role in insurance cases such as this is to facilitate continuation of cover with customers moving to a new insurer or to return premiums to the customers.
Jimmy Barber, Chief Operating Officer at FSCS, said:
“Despite exhaustive efforts of FSCS and other parties, it has not been possible to transfer these Alpha latent defect policies to another insurer. Therefore, FSCS is paying return of premiums to eligible customers.
“We are very disappointed that on this occasion we have been unable to reach the desired outcome for our customers, due to the complexity of the issues around obtaining replacement cover so will be paying return of premium.
In some cases we do face data challenges. Going forward, as part of the Prepare pillar of FSCS’s strategy for the 2020s, we are working with the insurance industry to help improve how better data can be provided to us in the event of an insurance failure. This will enable us to protect our customers in a timely fashion.”
Once the insurance premium refund has been paid, FSCS recommends that policyholders seek professional advice on obtaining replacement cover as soon as possible by contacting a suitable insurance broker who specialises in latent defect/structural damage policies.
Policyholders may be in breach of their mortgage terms and conditions if they do not have a valid latent defect policy for their property. Should policyholders not know of a suitable insurance broker to help with replacement cover, they can get help via the British Insurance Brokers’ Association’s ‘Find-A-Broker’ service by telephoning 0370 950 1790, email firstname.lastname@example.org
T: 020 7375 8638
T: 020 7375 8636
Notes for Editors
FSCS and Alpha Insurance
FSCS can only offer protection in relation to the insurance premium element paid to Alpha. Premium refund compensation has been calculated on a pro-rata basis and represents the unused portion of any premium that was paid. FSCS protection is limited to 90 per cent in relation to premium refund claims.
FSCS has not been involved in the calculation of return of premium compensation, which was initially calculated by CRL then verified by the Alpha Liquidator. Once the Alpha liquidator completed its checks, details are passed to FSCS for payment. Policyholders wanting to know how their premium refund payment was calculated should contact CRL in the first instance.
FSCS is the UK's statutory compensation scheme that protects customers of authorised financial services firms that carry out certain regulated activities. FSCS protects deposits, investment business, home finance (mortgage) advice, life and general insurance, insurance broking and debt management. FSCS can pay compensation if an authorised firm is unable to pay back money it owes its customers in connection with a regulated activity. The Scheme was set up by Parliament in 2001 and is funded by the financial services industry.
Declaring a firm in default
Before FSCS can pay compensation, it must be satisfied that a firm does not have sufficient funds to meet claims. It describes this as being ‘in default’. The Scheme will declare a firm in default if:
- it has received at least one claim; and
- it is satisfied that the financial services firm which has failed is unable to pay eligible claims itself.
FSCS is required to do this before it can pay compensation to eligible claimants.
Declaring a firm in default allows private individuals who have suffered actual financial loss as a result of their dealings with that firm to apply to the Scheme. Some businesses and charities may also be eligible, depending on the type of claim.
Dealing with a Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA) authorised firm that is carrying out certain authorised activities gives consumers access to the Financial Ombudsman Service (FOS) and FSCS. Consumers can check that the firm they are dealing with is authorised by using the FCA’s Financial Services Register.
An ISDN line is available if you are interested in arranging a radio interview with an FSCS spokesperson. Please get in touch with our public relations team by emailing email@example.com to arrange a suitable time and date.