Prudential Regulation Authority Rulebook

10.1

A relevant person is a person who was, at the time the act or omission giving rise to the claim against it took place, a participant firm.

10.2

A relevant person is in default if the FSCS has determined it to be in default under 10.3 and/or 10.4.

10.3

Subject to 10.6 and 10.7, and provided that the FSCS is not taking measures for the purpose of safeguarding the rights of eligible claimants in accordance with 5, the FSCS may determine a relevant person to be in default when it is, in the opinion of the FSCS or the PRA:

1. (1) unable to satisfy protected claims against it; or
2. (2) likely to be unable to satisfy protected claims against it.

10.4

The changes to this rule are effective from 23:00 on 31/12/2020.

The FSCS may determine a relevant person to be in default if it is satisfied that a protected claim exists, and the relevant person is the subject of one or more of the following proceedings in the UK (or of equivalent or similar proceedings in another jurisdiction):

1. (1) the passing of a resolution for a creditors' voluntary winding up;
2. (2) a determination by the relevant person’s regulator or competent authority that the relevant person appears unable to meet claims against it and has no early prospect of being able to do so;
3. (3) the appointment of a liquidator or administrator, or provisional liquidator or interim manager;
4. (4) the making of an order by a court of competent jurisdiction for the winding up of a company, the dissolution of a partnership, the administration of a company or partnership, or the bankruptcy of an individual; or
5. (5) the approval of a company voluntary arrangement, a partnership voluntary arrangement, or of an individual voluntary arrangement.

10.5

For claims arising in connection with a relevant person in default in accordance with this chapter, the FSCS must treat any term in the relevant person’s constitution or in its contracts of insurance, limiting its liabilities under a contract of long-term insurance to the amount of its assets, as limiting its liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.

10.6

The FSCS may not declare a member to be in default unless it is satisfied that the amounts which the Society may provide from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level of protection which would otherwise be available under this Part.

10.7

The FSCS may not declare an insurer under write-down to be in default while the write-down order is in effect.