1. What would the FSCS do if a large insurer were to become insolvent?

The FSCS's role is to protect policyholders. The Scheme would work with the insolvency practitioners, who would be responsible for the ongoing administration of the firm and the settlement of claims, to determine our involvement.

Any queries relating to policies or claims would be directed in the first instance to the insolvency practitioners.

The FSCS would work with the insolvency practitioners to ensure that policyholders had clear instructions on how to make a claim and what to do if they need immediate assistance.

The FSCS can provide funds to meet protected claims, including return of premiums, if a firm is unable to do so. The Scheme can also try to arrange (or assist) a transfer of some of the business to other insurers, if this is cost effective and practical.

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2. How long would it take to settle claims and make payments to policyholders?

The appointed insolvency practitioners would be responsible for processing claims for compensation. However, FSCS would work with the insolvency practitioners to enable payment of claims as quickly as possible. We would want to prioritise policyholders facing immediate hardship.

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3. Does FSCS protect businesses?

FSCS was set up mainly to assist private individuals, although some smaller businesses are also covered. Larger businesses are generally excluded, although there are some exceptions to this (for example for claims in respect of certain compulsory insurances). Our rules tell us which claims are eligible and form part of the PRA's Handbook, under Redress, Compensation.

For firms declared in default on or after 3 July 2015, these rules are contained within the Policyholder Protection Scheme.

For claims made under an insurance contract, small businesses are protected. A small business under the COMP rules is one that has an annual turnover of less than £1m.

The same levels of compensation apply whether the claimant is a private individual, small business, or a small company.

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