Prudential Regulation Authority Rulebook

20.1

The FSCS must pay a sum equal to 100% of any liability of a relevant person (or where applicable, a successor) in respect of a liability subject to compulsory insurance to the claimant as soon as reasonably practicable after it has determined the relevant person (or where applicable, the successor) to be in default.

20.2

The FSCS must calculate the liability of a relevant person (or where applicable, the successor) to the claimant under a relevant general insurance contract in accordance with the terms of the contract, and (subject to any limits in 17.2(1)) pay that amount to the claimant.

20.2A

Where a relevant person was an insurer under write-down and paid a top-up amount in relation to a claim in respect of a contract of insurance to which this Chapter applies, the FSCS must take that payment into account when calculating the liability under that contract of insurance.

20.3

Unless the FSCS is making arrangements to secure continuity of insurance cover under 4.1, the FSCS must calculate the liability of a relevant person (or where applicable, a successor) to the claimant under a contract of long-term insurance in accordance with the terms of the contract as it would be valued in a liquidation of the relevant person (or where applicable, the successor), or (in the absence of such relevant terms) in accordance with such reasonable valuation techniques as the FSCS considers appropriate.

20.4

1. (1) Unless the FSCS is seeking to secure continuity of cover for a relevant person under 4.1 it must:
1. (a) pay compensation in accordance with 20.3 for any benefit provided for under a protected contract of long-term insurance 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
2. (b) do so, 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. (2) If the FSCS decides to treat the liability of the relevant person (or where applicable, the successor) under the contract as reduced or (as the case may be) disregarded under 20.7 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. (3) Unless it has decided to treat the liability of the relevant person (or where applicable, the successor) under the contract as reduced or disregarded under 20.7 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:
1. (a) it considers that any benefit referred to in (1) is or may be excessive in any respect;
2. (b) it has referred the contract in question to an independent actuary under 20.6; or
3. (c) it considers that it may at some later date decide to treat the liability of the relevant person (or where applicable, the successor) under a contract as reduced or (as the case may be) disregarded under 20.7;
4. 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).

20.5

The FSCS must not treat any bonus provided for under a contract of long-term insurance as part of the claimant's claim except to the extent that:

1. (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. (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.

20.6

1. (1) If the FSCS is:
1. (a) seeking to secure continuity of cover under 4.1 or to calculate the liability owed to an eligible claimant under 20.3; and
2. (b) considers that the benefits provided for under a protected contract of long-term insurance are or may be excessive in any respect;
2. it must refer the contract to an actuary who is independent of the eligible claimant and of the relevant person (or where applicable, the successor).
3. (2) In this rule and in 20.7, 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.

20.7

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 (or where applicable, the successor) 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.

20.8

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.

20.9

When calculating compensation payable to the claimant in accordance with this Chapter, the FSCS must treat any term in the relevant person’s (or where applicable, the successor’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.

20.10

If a claimant's claim includes a claim as:

1. (1) trustee; or
2. (2) the operator of, or the person carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme;

the FSCS must treat him in respect of that claim as if his claim was the claim of a different person.

20.11

If a claimant has a claim as a bare trustee or nominee company for one or more beneficiaries, for the purpose of calculating compensation, the FSCS must treat the beneficiary or beneficiaries as having the claim, and not the claimant.

20.12

If a claimant has a claim:

1. (1) as the trustee of a small self-administered scheme, or an occupational pension scheme of an employer which is not a large company, large partnership or large mutual association, or the trustee or operator of, or the person carrying on the regulated activity of winding up a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme;
2. (2) for one or more members of a pension scheme (or, where relevant, the beneficiary of any member) whose benefits are money-purchase benefits;

for the purpose of calculating compensation, the FSCS must treat the member or members (or, where relevant, the beneficiary of any member) as having the claim, and not the claimant.

20.13

If any group of persons has a claim as:

1. (1) trustees; or
2. (2) operators of, or as persons carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or a personal pension scheme;

(or any combination thereof), the FSCS must treat them as a single and continuing person distinct from the persons who may from time to time be the trustees, operators or persons winding up the relevant pension scheme.

20.14

Where the same person has a claim as:

1. (1) trustee for different trusts or for different stakeholder pension schemes (which are not occupational pension schemes) or personal pension schemes; or
2. (2) the operator of, or the person carrying on the regulated activity of winding up, different stakeholder pension schemes (which are not occupational pension schemes) or personal pension schemes;

this Chapter applies as if the claims relating to each of these trusts or schemes were claims of different persons.

20.15

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 claim to eliminate the part of the claim which, in the FSCS's view, is a claim for those beneficiaries.

20.16

Where any of the provisions of 20.10 – 20.15 apply, the FSCS must try to ensure that any amount paid to:

1. (1) the trustee; or
2. (2) the operator of, or the person carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme;
3. is, in each case:
4. (3) for the benefit of members or beneficiaries who would be eligible claimants if they had a claim themselves; and
5. (4) no more than the amount of the loss suffered by those members or beneficiaries.

20.17

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.

20.18

If a claimant has a claim under a contract of insurance as agent for one or more persons, for the purpose of calculating compensation, the FSCS must treat each person as having the claim, not the claimant.

20.19

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.

20.20

In applying this Part to claims arising out of business done with a branch or establishment of the relevant person (or where applicable, the successor) outside the UK, the FSCS must interpret references to:

1. (1) persons entitled as personal representatives, trustees, bare trustees or agents, operators of pension schemes or persons carrying on the regulated activity of winding up pension schemes; or
2. (2) 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.