This sub-scheme covers claims for compensation that arise following the failure of an authorised insurer.
FSCS will safeguard policyholders if an authorised firm is unable to meet claims against it, for example, if it has been placed in provisional liquidation or administration.
To find out whether an insurance firm is authorised, search the Financial Conduct Authority's financial services register.
Policyholder protection is triggered if an authorised firm is unable to meet claims against it, for example, if it has been placed in provisional liquidation or administration.
Eligibility depends on a number of factors, including whether the policy was issued before or after Brexit.
FSCS does not cover re-insurance or marine, aviation, transport business and credit insurance.
If an insurer fails, the appointed insolvency practitioner or FSCS will first contact policyholders to explain the position regarding a policy or claim and what to do if they need immediate help.
FSCS's role will be to maintain the payment of benefits that are due to under-protected policies and to try and arrange for the continuity of insurance for all eligible policyholders. This may be arranged, for example, by transferring the ongoing policies of the failed insurer to another insurance firm, or by arranging the issue of new policies from another insurer (in substitution for existing policies).
We expect that an insolvency practitioner would appoint a run-off agent to calculate claims and handle any return of premium claims. FSCS will liaise with the insolvency practitioner (and run-off agent) to ensure that outstanding claims are processed as quickly as possible. FSCS carries out regular audits on the larger insolvent insurance firms to ensure that claims are being handled effectively and economically.
When a claim or return premium is agreed it is submitted to FSCS by the appointed run-off agent to confirm its eligibility under FSCS's rules, and for payment. For larger insurance firm failures ('estates') the eligibility check will be carried out by the run-off agent and FSCS will confirm eligibility at the time of payment.
Payments are made either by cheque or electronic transfer depending on the urgency of the case, usually within five days of receipt of the payment request.