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Application provision

1.1 This Part applies to the FSCS, and for the purposes of chapter 21, 22.6 - 22.8 and Annex 2, this Part also applies to participant firms and the Society.



Subject to 6.1, the FSCS must make arrangements to secure continuity of insurance for an eligible claimant under a protected contract of insurance which is a contract of long-term insurance with a relevant person, if:

  1. (1) the relevant person is the subject of any of the proceedings listed in 10.4;
  2. (2) it is reasonably practicable to do so;
  3. (3) in the opinion of the FSCS at the time it proposes to make the arrangements, it would be beneficial to the generality of eligible claimants covered by the proposed arrangements, and, in situations where the cost of securing continuity of insurance might exceed the cost of paying compensation under 3.1, any additional cost is likely to be justified by the benefits; and
  4. (4) where the relevant person is a member, the FSCS is satisfied that the amounts which the Society is able to 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.



In order to secure continuity of insurance under 4.1 the FSCS may take such measures as it considers appropriate to:

  1. (1) secure or facilitate the transfer of the business of the relevant person that is in default and which consists of carrying out contracts of long-term insurance or any part of that business, to another firm; and/or
  2. (2) secure the issue of policies by another firm to eligible claimants in substitution for their existing policies.



  1. (1) If the FSCS is seeking to secure continuity of insurance under 4.1, it must secure 100% of any benefit under a contract of long-term insurance which:
    1. (a) falls due, or would have fallen due, to be paid to any eligible claimant; or
    2. (b) had already fallen due to be paid to any eligible claimant before the beginning of that period and has not yet been paid;

and is paid to the eligible claimant in question as soon as reasonably practicable after the time when the benefit in question fell due, or would have fallen due, under contract.

  1. (2) Any payment under (1) is made subject to and in accordance with any other terms which apply or would have applied under the contract.
  2. (3) A payment made under (1) is required to be made regardless of whether the cost of making the payment is more or less than the cost of paying compensation under 3.13.3.
  3. (4) Where a payment is due under (1), the FSCS may:
    1. (a) make payments to or on behalf of eligible claimants on such terms (including any terms requiring repayment in whole or in part) and on such conditions as it thinks fit (subject to (1)); or
    2. (b) secure that payments (subject to (1)) are made to or on behalf of any such eligible claimants by the liquidator, administrator or provisional liquidator by giving him an indemnity covering any such payments or any class or description of such payments.



For the purposes of 4.3 and 6.16.3, "benefit" does not include:

  1. (1) any bonus provided for under the contract unless it was declared and the policyholder was contractually entitled to it before the relevant person became the subject of one or more of the proceedings listed in 10.4; or
  2. (2) any reduction which the FSCS has determined, or any benefit which the FSCS has decided to disregard under 20.7, to the extent that the FSCS has decided so to treat it.



Unless the FSCS has decided to treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded under 20.7, it must not treat as a reason for failing to secure, or for delaying the securing of, payments under 4.3 the fact that:

  1. (1) it considers that any benefit referred to in 4.3 is or may be excessive in any respect;
  2. (2) it has referred the contract in question to an independent actuary under 20.6; or
  3. (3) it considers that it may at some later date decide to treat the liability of the relevant person under a contract as reduced or disregarded under 20.7;

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 and for this purpose the option includes, but is not restricted to, a right to surrender the policy.



In making arrangements to secure continuity of insurance the FSCS must use its reasonable endeavours to seek the most cost-effective arrangements available.