Prudential Regulation Authority Rulebook

6.1

If the FSCS makes arrangements to:

1. (1) secure continuity of insurance under 4.1; or
2. (2) take measures for the purpose of safeguarding the rights of eligible claimants under 5.1 in respect of a contract of long-term insurance,

it must ensure that the claimant will receive 100% of any future benefit under his contract of long-term insurance, on terms corresponding in all material respects (so far as it appears to the FSCS to be reasonable in the circumstances), to those which have applied under the contract of long-term insurance.

6.2

If the FSCS takes measures for the purpose of safeguarding the rights of eligible claimants under 5.1 in respect of a contract of general insurance:

1. (1) where claims:
1. (a) arise in respect of a liability subject to compulsory insurance; or
2. (b) arise in respect of a liability subject to professional indemnity insurance; or
3. (c) arise from the death or incapacity of the policyholder due to injury, sickness, or infirmity; or
4. (d) arise in respect of a liability subject to building guarantee insurance;
5. it must ensure that the claimant will receive 100% of any benefit under his contract of general insurance; and
2. (2) in all other cases, it must ensure that the claimant will receive at least 90% of any benefit under his contract of general insurance;

and in either case, on terms corresponding in all material respects (so far as it appears to the FSCS to be reasonable in the circumstances), to those which have applied under the contract of general insurance.

6.3

If the FSCS secures less than 100% of any benefit of a claimant under a contract falling under 6.2(2), then the FSCS must ensure that any future premiums that the claimant is committed to paying under the contract will be reduced by an equivalent amount to reflect the reduced benefit.

6.4

For the purposes of 4.1(3) and 5.1(1), when assessing the cost of paying compensation under 3.1 – 3.3, the FSCS may have regard to the likely total cost of paying compensation arising out of the default, not just the compensation amounts likely to be payable to particular eligible claimants covered by the proposed arrangements for continuity.