Supplemental provisions concerning insurers
Section 376: Continuation of contracts of long-term insurance where insurer in liquidation
653.This section provides for the business of an insolvent insurer so far as it relates to contracts of long-term insurance to be transferred to another company, rather than for the policyholders to receive a share of the assets available on winding up. Policyholders of long term insurers face different problems to most consumers if the company fails. They enter into agreements, for example for pensions, which are designed to last many years, and the benefits they expect to receive build up over time. Also, the terms of the contract (and importantly the premium) are set at the outset. If, for example, during the course of the contract they were to develop an illness they might not then be able to obtain alternative cover. For these reasons, it is desirable, where possible, to maintain the insurer’s business as a going concern, or to find an alternative insurer to take over its policies, rather than allowing it to be wound up.
Section 377: Reducing the value of contracts instead of winding up
654.This section is intended to facilitate timely payments on, or the transfer of, insurance contracts of a company which has become insolvent, rather than leaving these to be matters to be resolved at the end of an insolvency process, which may take a considerable period of time.
Section 378: Treatment of assets on winding up
655.This section empowers the Treasury to make regulations to allow for the separate treatment in insolvency situations of an insurer’s contracts of long-term and general insurance, given the special characteristics of long term business (referred to in the note on section 376 above).
Section 379: Winding-up rules
656.This section enables the making of rules to deal with the winding up of insurers, under the powers of the Insolvency Act 1986.
