Consultations & legislation
Strengthening the administration regime for insurers: a consultation
Issued: 25 March 2010
Open date: 25 March 2010
Close date: 25 June 2010
The Government seeks views on proposals to improve the protection and payment of benefits for holders of insurance contracts with an insurer facing financial difficulties
In light of reviewing other insolvency and administrative regimes across the financial services industry, and reflecting on the lessons learnt during the financial crisis, the Government considers that some areas of the administration regime for insurers could be strengthened.
The UK insurance industry is a key part of the UK financial services sector and is the second largest insurance industry worldwide. It accounts for 11 per cent of premiums globally and, in 2008, it controlled over 13 per cent of the UK equities market.
As of March 2010, 972 companies are authorised by the Financial Services Authority (FSA) to carry out insurance business in the UK. Of these:
- 735 carry out general business only (which includes, for example, motor, household and commercial insurance);
- 93 carry out long-term business only (such as life insurance and pensions); and
- 44 carry out both general and long-term business.
The incidences of insurers being put into administration or liquidation in the UK have been low, with no further incidences occurring during the recent period of financial instability. As a result the procedures and processes surrounding insurers entering into administration have not been developed significantly either in practice or in law in recent times.
The Government now seeks views on proposals to improve the protection and payment of benefits for holders of insurance contracts with an insurer facing financial difficulties, in particular to address gaps within administration regime for insurers in comparison to the liquidation regime. The Government proposals include:
- applying the existing rules for valuing contracts of insurance in liquidation to
administration; and - revising the objectives of an administrator of an insurance company, by:
- changing the law to require administrators to provide assistance to the FSCS to
enable it to administer the compensation scheme and secure continuity of
contracts of insurance; and - applying existing powers relating to continuity of contracts of long-term
insurance on the liquidation of an insurer to administration.
- changing the law to require administrators to provide assistance to the FSCS to
This consultation closes on 25 June 2010.
The document is available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.Related links
- Insurance
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