Part

COMP Compensation Sourcebook

Chapter

Calculating compensation

Printed on: 22/12/2024

Rulebook at: 31/03/2005

COMP 12

Calculating compensation

COMP 12.1

Application and Purpose

  • 01/12/2004

Application

COMP 12.1.1

handbook-rule
This chapter applies to the FSCS.
  • 01/12/2001

COMP 12.1.2

handbook-guidance
This chapter is also relevant to claimants, since it sets out how a claim will be quantified. (For the process of paying compensation, including the limits on the amount of compensation that can be paid, see COMP 8 - COMP 11).
  • 01/12/2001

Purpose

COMP 12.1.3

handbook-guidance
The purpose of this chapter is to set out the different ways in which the FSCS is to calculate compensation.
  • 01/12/2001

COMP 12.2

Quantification: general

  • 01/12/2004

COMP 12.2.1

handbook-rule
The amount of compensation payable to the claimant in respect of any type of protected claim is the amount of his overall net claim against the relevant person at the quantification date.
  • 01/12/2001

COMP 12.2.2

handbook-rule
COMP 12.2.1 R is, however, subject to the other provisions of COMP, in particular those rules that set limits on the amount of compensation payable for various types of protected claim. The limits are set out in COMP 10.
  • 01/12/2001

COMP 12.2.3

handbook-guidance
Where a liability of a relevant person to an eligible claimant could fall within more than one type of protected claim (see COMP 5.2.1 R), for example a claim in connection with money held by an ISD investment firm that is also a credit institution, the FSCS should seek to ensure that the claimant does not receive any further compensation payment from the FSCS in cases where the claimant has already received compensation from the FSCS in respect of that claim.
  • 01/12/2001

Overall net claim

COMP 12.2.4

handbook-rule
A claimant's overall net claim is the sum of the protected claims of the same category that he has against a relevant personin default, less the amount of any liability which the relevant person may set off against any of those claims (see COMP 10.2.2 G).
  • 01/12/2001

COMP 12.2.5

handbook-guidance
For the different categories of protected claim, see COMP 5 and COMP 10.2.3 R.
  • 01/12/2001

COMP 12.2.6

handbook-guidance
In calculating the claimant's overall net claim, the FSCS may rely, to the extent that it is relevant, on any determination by:
(1) a court of competent jurisdiction;
(2) a trustee in bankruptcy;
(3) a liquidator;
(4) any other recognised insolvency practitioner;
and on the certification of any net sum due which is made in default proceedings of any exchange or clearing house.
  • 01/12/2001

COMP 12.2.7

handbook-rule
In calculating the claimant's overall net claim, the FSCS must take into account any payments to the claimant (including amounts recovered by the FSCS on behalf of the claimant) made by the relevant person or the FSCS or any other person, if that payment is connected with the relevant person's liability to the claimant.
  • 01/12/2003

COMP 12.2.8

handbook-rule
The FSCS must calculate the amount of compensation due to the claimant as soon as reasonably possible after it is satisfied that the conditions in COMP 3.2.1 R have been met.
  • 01/12/2003

COMP 12.2.9

handbook-rule
In calculating the claimant's overall net claim the FSCS must take into account the amounts paid by, or expected to be paid by, the Society from the Central Fund to meet a member's liabilities under the contract which gives rise to the claim.
  • 01/01/2004

COMP 12.3

Quantification date

  • 01/12/2004

Protected deposits

COMP 12.3.1

handbook-rule
For a protected deposit claim, the quantification date is the date the relevant person is determined to be in default, or the date the protected deposit was due and payable, if later.
  • 01/12/2001

Protected contracts of insurance

COMP 12.3.2

handbook-rule
For a claim under a protected contract of insurance that is a long-term insurance contract, the FSCS must determine as the quantification date a specific date by reference to which the liability of the relevant person to the eligible claimant is to be determined.
  • 01/12/2001

COMP 12.3.3

handbook-rule
For a claim under a protected contract of insurance that is a relevant general insurance contract, the FSCS must determine as the quantification date a specific date by reference to which the liability of the relevant person to the eligible claimant is to be determined.
  • 01/12/2001

COMP 12.3.4

handbook-rule
For a claim in respect of the unexpired premiums under a protected contract of insurance that is a relevant general insurance contract (see COMP 5.4.7 R (3)), the quantification date, being the date by which the liability of the relevant person to the eligible claimant is to be determined, is the date the policy was terminated or cancelled.
  • 01/12/2001

Protected investment business

COMP 12.3.5

handbook-rule
For a claim made in connection with protected investment business which is not an ICD claim, the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of the determination of default.
  • 01/12/2001

COMP 12.3.6

handbook-rule
For a claim made in connection with protected investment business which is an ICD claim, the quantification date is the date the relevant person is determined to be in default.
  • 01/12/2001

Protected mortgage business

COMP 12.3.7

handbook-rule
For a claim made in connection with protected mortgage business , the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of determination of default.
  • 31/10/2004

Protected non-investment insurance mediation

COMP 12.3.8

handbook-rule
For a claim made in connection with protected non-investment insurance mediation, the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of determination of default.
  • 01/12/2001

COMP 12.4

The compensation calculation

  • 01/12/2004

Protected deposit with incoming EEA firm

COMP 12.4.1

handbook-rule
If the claimant has a DGD claim against an incoming EEA firm which is a credit institution, the FSCS must take account of the liability of the Home State deposit-guarantee scheme in calculating the compensation payable by the FSCS.
  • 01/12/2001

Protected investment business: general

COMP 12.4.2

handbook-rule
The FSCS may pay compensation for any claim made in connection with protected investment business which is not:
(1) a claim for property held; or
(2) a claim arising from transactions which remain uncompleted at the quantification date;
only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.
  • 01/12/2001

COMP 12.4.3

handbook-rule
The FSCS must not pay compensation for any claim in connection with protected investment business to the extent that it relates to or depends on:
(1) a failure of investment performance to match a guarantee given or representation made; or
(2) a contractual obligation to pay or promise to pay which the FSCS considers to have been undertaken without full consideration passing to the relevant person or in anticipation of possible insolvency; or
(3) the mere fluctuation in the value of an investment.
  • 01/12/2001

COMP 12.4.4

handbook-rule
If the claimant has an ICD claim against an incoming EEA firm which is an ISD investment firm (including a credit institution which is an ISD investment firm ), the FSCS must take account of the liability of the Home State compensation scheme in calculating the compensation payable by the FSCS.
  • 01/12/2001

Protected investment business: claims covered by the pensions review

COMP 12.4.5

handbook-rule
If the claimant has a claim in connection with protected investment business relating to the fact that the claimant has:
(1) while eligible or reasonably likely to become eligible to be a member of an occupational pension scheme, instead become a member of a personal pension scheme or entered into a retirement annuity; or
(2) ceased to be a member of, or to pay contributions to, an occupational pension scheme, and has instead become a member of a personal pension scheme or entered into a retirement annuity; or
(3) transferred to a personal pension scheme accrued rights under an occupational pension scheme which is not a defined contribution (money purchase) scheme; or
(4) ceased to be a member of an occupational pension scheme and has instead (by virtue of such a provision as is mentioned in section 591(2)(g) of the Income and Corporation Taxes Act 1988) entered into arrangements for securing relevant benefits by means of an annuity;
the FSCS must take the steps set out in COMP 12.4.6R.
  • 01/12/2001

COMP 12.4.6

handbook-rule
If COMP 12.4.5R applies, the FSCS must follow the Specification of Standards and Procedures issued by the FSA in October 1994, as supplemented and modified by subsequent guidance issued by the FSA (in particular, that of November 1996) (the 'Specification') in:
(1) assessing whether a relevant person has complied with the relevant regulatory requirements;
(2) assessing whether non-compliance has caused the claimant loss; and
(3) calculating the amount of compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);
unless the FSCS considers that departure from the Specification is essential in order to provide the claimant with fair compensation.
  • 01/12/2001

Protected investment business: FSAVC Review

COMP 12.4.7

handbook-rule
Where a claim made in connection with protected investment business relates to an Additional Voluntary Contribution policy advised on or arranged by a relevant person, the FSCS must follow the FSAVC Review Model Guidance issued by the FSA in May 2000 (the "Guidance") in:
(1) assessing whether the relevant person has complied with the relevant regulatory requirements;
(2) assessing whether non-compliance has caused the claimant loss; and
(3) calculating the compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);
unless the FSCS considers that departure from the Guidance is essential in order to provide the claimant with fair compensation.
  • 01/12/2001

Protected investment business: excessive benefits

COMP 12.4.8

handbook-rule
The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected investment business that is not an ICD claim, if it is satisfied that:
(1) there is evidence of contributory negligence by the claimant; or
(2) payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar investments with other relevant persons; and
it would be inequitable for the FSCS not to take account of (1) or (2).
  • 01/12/2001

Protected contracts of insurance: liabilities subject to compulsory insurance

COMP 12.4.9

handbook-rule
The FSCS must pay a sum equal to 100% of any liability of a relevant person who is an insurance undertaking in respect of a liability subject to compulsory insurance to the claimant as soon as reasonably practicable after it has determined the relevant person to be in default.
  • 01/12/2001

Protected contracts of insurance: general insurance

COMP 12.4.10

handbook-rule
The FSCS must calculate the liability of a relevant person to the claimant under a relevant general insurance contract in accordance with the terms of the contract, and (subject to any limits in COMP 10.2.3R) pay that amount to the claimant.
  • 01/12/2001

Protected contracts of insurance: long-term insurance

COMP 12.4.11

handbook-rule
Unless the FSCS is making arrangements to secure continuity of insurance cover under COMP 3.3.1R to COMP 3.3.2ER, the FSCS must calculate the liability of a relevant person to the claimant under a long-term insurance contract in accordance with the terms of the contract as valued in a liquidation of the relevant person, or (in the absence of such relevant terms) in accordance with such reasonable valuation techniques as the FSCS considers appropriate.
  • 01/12/2003

COMP 12.4.11A

handbook-rule
(1) Unless the FSCS is seeking to secure continuity of cover for a relevant person under COMP 3.3.1 R to COMP 3.3.2E R, it must:
(a) pay compensation in accordance with COMP 12.4.11 R for any benefit provided for under a protected long-term insurance contract which has fallen due or would have fallen due under the contract to be paid to any eligible claimant and has not already been paid; and
(b) do as soon as reasonably practicable after the time when the benefit in question fell due or would have fallen due under the contract (but subject to and in accordance with any other terms which apply or would have applied under the contract).
(2) If the FSCS decides to treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R then, for the purposes of (1), the value of benefits falling due after the date of that decision must be treated as reduced or disregarded to that extent.
(3) Unless it has decided to treat the liability of the relevant person under the contract as reduced or disregarded under COMP 12.4.14 R the FSCS must not treat as a reason for failing to pay, or for delaying the payment of compensation in accordance with (1), the fact that:
(a) it considers that any benefit referred to in (1) is or may be excessive in any respect; or
(b) it has referred the contract in question to an independent actuary under COMP 12.4.13 R; or
(c) it considers that it may at some later date decide to treat the liability of the relevant person under a contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R;
save where the FSCS decides to exclude certain benefits to the extent that they arise out of the exercise of any option under the policy (for this purpose option includes, but is not restricted to, a right to surrender the policy).
  • 01/12/2003

COMP 12.4.12

handbook-rule
The FSCS must not treat any bonus provided for under a long-term insurance contract as part of the claimant's claim except to the extent that:
(1) a value has been attributed to it by a court in accordance with the Insurers (Winding Up) Rules 2001 or any equivalent rules or legislative provision in force from time to time; or
(2) the FSCS considers that a court would be likely to attribute a value to the bonus if it were to apply the method set out in those rules.
  • 01/12/2003

COMP 12.4.13

handbook-rule
(1) If the FSCS is:
(a) seeking to secure continuity of cover under COMP 3.3.1 R to COMP 3.3.2E R or to calculate the liability owed to an eligible claimant under COMP 12.4.11 R; and
(b) considers that the benefits provided for under a protected long-term insurance contract are or may be excessive in any respect,
it must refer the contract to an actuary who is independent of the eligible claimant and of the relevant person.
(2) In this rule and in COMP 12.4.14 R, a benefit is only "excessive" if, at the time when the relevant person decided to confer or to offer to confer that benefit, no reasonable and prudent insurer in the position of the relevant person would have so decided given the premiums payable and other contractual terms.
  • 01/12/2003

COMP 12.4.14

handbook-rule
If the FSCS is satisfied, following the actuary's written recommendation, that any of the benefits provided for under the contract are or may be excessive, it may treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded for the purpose of any payment made after the date of that decision.
  • 01/12/2003

COMP 12.4.15

handbook-rule
The FSCS may rely on the value attributed to the contract by the actuary when calculating the compensation payable to the claimant, or when securing continuity of cover.
  • 01/12/2001

Protected non-investment insurance mediation

COMP 12.4.16

handbook-rule
For claims arising in connection with protected contracts of insurance, the FSCS must treat any term in an insurance undertaking's constitution or in its contracts of insurance, limiting the undertaking's liabilities under a long-term insurance contract to the amount of its assets, as limiting the undertaking's liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.
  • 01/12/2001

Protected mortgage business

COMP 12.4.17

handbook-rule
The FSCS may pay compensation for any claim made in connection with protected mortgage business only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.
  • 31/10/2004

COMP 12.4.18

handbook-rule
The FSCS must not pay compensation for any claim in connection with protected mortgage business to the extent that it relates or depends on:
(1) a failure of investment performance to match a guarantee given or representation made; or
(2) the mere fluctuation in the value of property
  • 31/10/2004

COMP 12.4.19

handbook-rule
The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected mortgage business if it is satisfied that there is evidence of contributory negligence by the claimant and it would be inequitable for FSCS not to take account of that fact.
  • 31/10/2004

Protected non-investment insurance mediation

COMP 12.4.20

handbook-rule
The FSCS may pay compensation for any claim made in connection with protected non-investment insurance mediation only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.
  • 01/12/2001

COMP 12.4.21

handbook-rule
The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected non-investment insurance mediation if it is satisfied that:
(1) there is evidence of contributory negligence by the claimant; or
(2) payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar contracts with other relevant persons; and
it would be inequitable for FSCS not to take account of (1) or (2).
  • 01/12/2001

COMP 12.6

Quantification: trustees, personal representatives, agents, and joint claims

  • 01/12/2004

Trustees

COMP 12.6.1

handbook-rule
If a claimant's claim includes a claim as trustee, the FSCS must treat him in respect of that claim as if his claim as trustee were a claim of a different person.
  • 01/12/2001

COMP 12.6.2

handbook-rule
If a claimant has a claim as a bare trustee or nominee company for one or more beneficiaries, the FSCS must treat the beneficiary or beneficiaries as having the claim, and not the claimant.
  • 01/12/2001

COMP 12.6.3

handbook-rule
If any group of persons has a claim as trustees, the FSCS must treat them as a single and continuing person distinct from the persons who may from time to time be the trustees.
  • 01/12/2001

COMP 12.6.4

handbook-rule
Where the same person has a claim as trustee for different trusts, COMP applies as if the claims relating to each of these trusts were claims of different persons.
  • 01/12/2001

COMP 12.6.5

handbook-rule
Where the claimant is a trustee, and some of the beneficiaries of the trust are persons who would not be eligible claimants if they had a claim themselves, the FSCS must adjust the amount of the overall net claim to eliminate the part of the claim which, in the FSCS's view, is a claim for those beneficiaries.
  • 01/12/2001

COMP 12.6.6

handbook-rule
Where COMP 12.6.1 R to COMP 12.6.5 R apply, the FSCS must try to ensure that any compensation paid to the trustee:
(1) is for the benefit of beneficiaries who would be eligible claimants if they had a claim themselves; and
(2) does not exceed the amount of the loss suffered by those beneficiaries.
  • 01/12/2001

COMP 12.6.7

handbook-rule
Where a person A is entitled (whether as trustee or otherwise) to a deposit made out of a clients' or other similar account containing money to which one or more persons are entitled, the FSCS must treat each of those other persons, and not A, as entitled to the part of the deposit that corresponds to the proportion of the money in the account to which the other person is entitled.
  • 01/12/2001

Personal representative

COMP 12.6.8

handbook-rule
Where a person numbers among his claims a claim as the personal representative of another, the FSCS must treat him in respect of that claim as if he were standing in the shoes of that other person.
  • 01/12/2001

Agents

COMP 12.6.9

handbook-rule
If a claimant has a claim as agent for one or more principals, the FSCS must treat the principal or principals as having the claim, not the claimant.
  • 01/12/2001

Joint claims

COMP 12.6.10

handbook-rule
If two or more persons have a joint beneficial claim, the claim is to be treated as a claim of the partnership if they are carrying on business together in partnership. Otherwise each of those persons is taken to have a claim for his share, and in the absence of satisfactory evidence as to their respective shares, the FSCS must regard each person as entitled to an equal share.
  • 01/12/2001

Foreign law

COMP 12.6.11

handbook-rule
In applying COMP to claims arising out of business done with a branch or establishment of the relevant person outside the United Kingdom, the FSCS must interpret references to persons entitled as personal representatives, trustees, bare trustees or agents, or references to persons having a joint beneficial claim or carrying on business in partnership, as references to persons entitled, under the law of the relevant country or territory, in a capacity appearing to the FSCS to correspond as nearly as may be to that capacity.
  • 01/12/2001

Claims arising under COMP 3.2.4 R

COMP 12.6.12

handbook-rule
If a firm has a claim under COMP 3.2.4 R, the FSCS must treat each customer of the firm as having the claim for the purposes of calculating compensation within COMP 12.
  • 14/01/2005