Part XVU.K. The Financial Services Compensation Scheme

Modifications etc. (not altering text)

C2Pt. 15 modified (29.9.2008 at 8.00 a.m.) by The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 29 (with art. 30(6))

C3Pt. 15 modified (7.10.2008 at 9.30 a.m.) by The Heritable Bank plc Transfer of Certain Rights and Liabilities Order 2008 (S.I. 2008/2644), art. 14 (with art. 15(8)

Provisions of the schemeU.K.

217 Insurers in financial difficulties.U.K.

(1)The compensation scheme may, in particular, include provision for the scheme manager to have power to take measures for safeguarding policyholders, or policyholders of a specified class, of relevant insurers.

(2)“Relevant insurers” means relevant persons who—

(a)have permission to effect or carry out contracts of insurance; and

(b)are in financial difficulties.

(3)The measures may include such measures as the scheme manager considers appropriate for—

(a)securing or facilitating the transfer of a relevant insurer’s business so far as it consists of the carrying out of contracts of insurance, or of any part of that business, to another authorised person;

(b)giving assistance to the relevant insurer to enable it to continue to effect or carry out contracts of insurance.

(4)The scheme may provide—

(a)that if measures of a kind mentioned in subsection (3)(a) are to be taken, they should be on terms appearing to the scheme manager to be appropriate, including terms reducing, or deferring payment of, any of the things to which any of those who are eligible policyholders in relation to the relevant insurer are entitled in their capacity as such;

(b)that if measures of a kind mentioned in subsection (3)(b) are to be taken, they should be conditional on the reduction of, or the deferment of the payment of, the things to which any of those who are eligible policyholders in relation to the relevant insurer are entitled in their capacity as such;

(c)for ensuring that measures of a kind mentioned in subsection (3)(b) do not benefit to any material extent persons who were members of a relevant insurer when it began to be in financial difficulties or who had any responsibility for, or who may have profited from, the circumstances giving rise to its financial difficulties, except in specified circumstances;

(d)for requiring the scheme manager to be satisfied that any measures he proposes to take are likely to cost less than it would cost to pay compensation under the scheme if the relevant insurer became unable, or likely to be unable, to satisfy claims made against him.

(5)The scheme may provide for the Authority to have power—

(a)to give such assistance to the scheme manager as it considers appropriate for assisting the scheme manager to determine what measures are practicable or desirable in the case of a particular relevant insurer;

(b)to impose constraints on the taking of measures by the scheme manager in the case of a particular relevant insurer;

(c)to require the scheme manager to provide it with information about any particular measures which the scheme manager is proposing to take.

(6)The scheme may include provision for the scheme manager to have power—

(a)to make interim payments in respect of eligible policyholders of a relevant insurer;

(b)to indemnify any person making payments to eligible policyholders of a relevant insurer.

(7)A provision of the scheme made by virtue of section 213(3)(b) may include power to impose levies for the purpose of meeting expenses of the scheme manager incurred in—

(a)taking measures as a result of any provision of the scheme made by virtue of subsection (1);

(b)making payments or giving indemnities as a result of any such provision made by virtue of subsection (6).

(8)“Financial difficulties” and “eligible policyholders” have such meanings as may be specified.