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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.

1.1

03/07/2015

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.

1.2

01/04/2018

In this Part, the following definitions shall apply:

article 9 default

has the meaning given in article 2(2) of the compensation transitionals order.

authorised insurance company

means (in accordance with the compensation transitionals order) a person who was, at any time before 1 December 2001, authorised under section 3 or 4 of the Insurance Companies Act 1982 to carry on insurance business of any class in the UK.

base costs

means management expenses which are not attributable to any insurance class.

base costs levy

means a levy, forming part of the management expenses levy, to meet the base costs in the financial year of the compensation scheme to which the levy relates, each participant firm's (and, where applicable, the Society’s) share being calculated in accordance with the FSCS Management Expenses Levy Limit and Base Costs Part.

claim

means a valid claim made in respect of a civil liability:

      1. (1) owed by a relevant person; or
      2. (2) owed by a relevant person which has been assumed by a successor and which is based on the acts or omissions of the relevant person;

under a contract of insurance.

COMP

means the Compensation Sourcebook of the PRA Handbook in force immediately prior to 3 July 2015.

compensation costs

means the costs incurred:

      1. (1) in paying compensation in accordance with this Part;
      2. (2) as a result of making the arrangements contemplated in 4.1 or 4.3 or taking the measures contemplated in 5.1; or
      3. (3) in making payments or giving indemnities under 18.2.

compensation costs levy

means a levy imposed by the FSCS on participant firms to meet compensation costs, each participant firm’s share being calculated in accordance with 21.37 – 21.41.

compensation transitionals order

means the Financial Services and Markets Act 2000 (Transitional Provisions, Repeals and Savings) (Financial Services Compensation Scheme) Order 2001 (SI 2001/2967).

contribution group

means one of the groups of participant firms within a sub-scheme in existence prior to 1 April 2008 set out in FEES 6.5.7 R at the time, being groups that carried on business of a similar nature, to which compensation costs and specific costs were allocated in accordance with FEES 6.4 and FEES 6.5 in force at the relevant time.

credit

means the class of contract of insurance, specified in paragraph 14 of Part I of Schedule 1 to the Regulated Activities Order.

depositary

has the meaning given to it in regulation 2 of the Alternative Investment Fund Managers Regulations 2013.

directive friendly society

means a friendly society that is a UK Solvency II firm.

eligible claimants

means a person who is eligible to bring a claim for compensation under 7.1.

FEES

means the Fees Manual of the PRA Handbook in force immediately prior to 3 July 2015.

friendly society

means an incorporated friendly society or a registered friendly society.

Friendly Societies Protection Scheme

means the Friendly Societies Protection Scheme established in accordance with section 141 of the Financial Services Act 1986.

group

has the meaning given to it in section 421 of FSMA and where the context requires, includes reference to Gibraltar as appropriate.

habitual residence

means:

      1. (1) if the policyholder is an individual, the address given by the policyholder as his residence if it reasonably appears to be a residential address and there is no evidence to the contrary;
      2. (2) if the policyholder is not an individual or a group of individuals, the State in which the policyholder has its place of establishment, or, if it has more than one, its relevant place of establishment; or
      3. (3) in respect of the variation of a life policy, or the purchase of a pension annuity related to a life policy, unless there is evidence to the contrary, the habitual residence of the policyholder at the date on which the policyholder signed the proposal for the life policy.

holding company

has the meaning given to it in section 1159(1) of the Companies Act 2006 (Meaning of “subsidiary” etc).

in default

means the status of being in default following a determination under 10.2 for a relevant person (or where applicable, under 11.2 for a successor).

insurance class

means one of the classes set out in Annex 1.

large company

means a body corporate which does not qualify as a small company under section 247 of the Companies Act 1985, or section 382 of the Companies Act 2006 as applicable.

large mutual association

means an unincorporated mutual association or an unincorporated association (which is not a mutual association) with net assets of more than £1.4 million (or its equivalent in any currency at the relevant time).

large partnership

means a partnership with net assets of more than £1.4 million (or its equivalent in any other currency at the relevant time).

levy limit

means the maximum aggregate amount of compensation costs and specific costs that may be allocated to a particular insurance class in one financial year as set out in Annex 1.

liability subject to compulsory insurance

means any liability required under any of the following enactments to be covered by insurance or (as the case may be) by some other provisions for securing its discharge:

      1. (1) section 1(4A)(d) of the Riding Establishments Act 1964 (or any corresponding enactment for the time being in force in Northern Ireland);
      2. (2) section 1 of the Employers' Liability (Compulsory Insurance) Act 1969 or Article 5 of the Employers' Liability Order (Defective Equipment and Compulsory Insurance) (Northern Ireland) Order 1972;
      3. (3) Part VI of the Road Traffic Act 1988 or Part VIII of the Road Traffic (Northern Ireland) Order 1981;
      4. (4) section 19 of the Nuclear Installations Act 1965.

life policy

means (in accordance with the definition of a 'qualifying contract of insurance' in article 3(1) of the Regulated Activities Order) a contract of long-term insurance (other than a reinsurance contract and a pure protection contract) and a long-term care insurance contract.

limited liability partnership

means:

      1. (1) a body corporate incorporated under the Limited Liability Partnerships Act 2000;
      2. (2) a body corporate incorporated under legislation having the equivalent effect to the Limited Liability Partnerships Act 2000.

Lloyd’s policy

means a contract of insurance written at Lloyd’s.

long-term care insurance contract

means a contract of long-term insurance:

      1. (1) which provides, would provide at the policyholder's option, or is sold or held out as providing, benefits that are payable or provided if the policyholder's health deteriorates to the extent that he cannot live independently without assistance and that is not expected to change; and
      2. (2) under which the benefits are capable of being paid for periodically for all or part of the period that the policyholder cannot live without assistance;

where 'benefits' are services, accommodation or goods necessary or desirable for the continuing care of the policyholder because he cannot live independently without assistance.

management expenses

means (in accordance with section 223 of FSMA (Management expenses)) expenses incurred or expected to be incurred by the FSCS in connection with its function under FSMA, other than compensation costs and costs incurred under Part 15A of FSMA .

management expenses levy

means a levy imposed by the FSCS on participant firms to meet the management expenses and which is made up of one or more of a base cost levy and a specific costs levy, each participant firm's share being calculated in accordance with 21.28 – 21.35.

mesothelioma regulations

means The Compensation Act 2006 (Contribution for Mesothelioma Claims) Regulations 2006 (SI 2006/3259).

mesothelioma victim

means (in accordance with section 3 (1) of the Compensation Act 2006) a person who has contracted mesothelioma as a result of exposure to asbestos by a responsible person.

money laundering

means any act which:

      1. (1) constitutes an offence under section 18 (Money laundering) of the Terrorism Act 2000;
      2. (2) constitutes an offence under section 327 (Concealing etc), section 328 (Arrangements) or section 329 (Acquisition, use and possession) of the Proceeds of Crime Act 2002;
      3. (3) constitutes an attempt, conspiracy or incitement to commit an offence specified in paragraph (2);
      4. (4) constitutes aiding, abetting, counselling or procuring the commission of an offence specified in paragraph (2); or
      5. (5) would constitute an offence specified in paragraph (2), (3), or (4) if done in the United Kingdom.

money-purchase benefits

means in relation to a member of a personal pension scheme or an occupational pension scheme or the widow or widower or surviving civil partner of a member of such a scheme, benefits the rate or amount of which is calculated solely by reference to the schemes assets which (because of the nature of the calculation) must necessarily suffice to provide the benefits which fall within section 181 of the Pensions Scheme Act 1993 and section 99 of the Pensions Act 2008, each as amended by section 29 of the Pensions Act 2011.

nominee company

means a body corporate whose business consists solely of acting as a nominee holder of investments or other property.

occupational pension fund management business

means the business of carrying on:

      1. (1) pension fund management;
      2. (2) (other than in connection with a personal pension schemepension fund management written as linked long-term business, for an occupational pension scheme or for an institution falling within article 2 of the Council Directive of 3 June 2003 on the activities and supervision of institutions for occupation retirement provision (No 2003/43/EC), but only to the extent that:
        1. (a) there is no transfer to the participant firm of:
          1. (i) investment, market or credit risk;
          2. (ii) mortality or expense risk prior to any annuity being effected; and
        2. (b) any annuity options provide for the participant firm to change the annuity rates without prior notice.

occupational pension scheme

means a scheme specified in article 3(1) of the Regulated Activities Order which is, in summary, a pension scheme established for the purpose of providing benefits to people with service in employments of a prescribed description.

operator

means (in relation to a personal pension scheme or a stakeholder pension scheme) the person who carries on the regulated activity specified in article 52 of the Regulated Activities Order (Establishing a pension scheme etc).

overseas financial services institution

means an institution authorised to carry on any regulated activity or other financial service by an overseas regulator.

participant firm

means a firm which is an insurer, or a member (except 21, 22.6 - 22.8 and Annex 2 in respect of a member).

pension annuity

means an investment purchased with the sums derived from the vesting (partial or full) of a pension policy or pension contract, for the purposes of securing the beneficiary's entitlement to immediate or future benefits.

pension contract

means a contract under which rights to benefits are obtained by the making of contributions to an occupational pension scheme or to a personal pension scheme, where the contributions are paid to a regulated collective investment scheme.

pension fund management

means in relation to a class of contract of insurance the class of contract of insurance specified in paragraph VII of Part II of Schedule 1 to the Regulated Activities Order (Contracts of long-term insurance).

pension policy

means a contract under which a right to benefits results from contributions made to an occupational pension scheme or to a personal pension scheme, where the contributions are paid to a long-term insurer.

pension scheme

means a scheme under which a right to benefits results from contributions made under a pension contract or pension policy.

personal pension scheme

means a scheme or arrangement which is not an occupational pension scheme or stakeholder pension scheme and which is comprised in one or more instruments or agreements having or capable of having effect so as to provide benefits to or in respect of people:

      1. (1) on retirement;
      2. (2) on having reached a particular age; or
      3. (3) on termination of service in an employment.

policyholder

means (as defined in article 3 of the Financial Services and Markets Act 2000 (Meaning of "Policy” and "Policyholder") Order 2001 (SI 2001/2361)) the person who for the time being is the legal holder of the policy, including any person to whom, under the policy, a sum is due, a periodic payment is payable or any other benefit is to be provided or to whom such a sum, payment or benefit is contingently due, payable or to be provided.

professional indemnity insurance

means contracts of insurance, including directors’ and officers’ liability and error and omissions liability, against the risks of the persons insured incurring liabilities to third parties arising from wrongful acts (such as breach of duty, breach of trust, negligence, error or omissions) by professionals, named individuals or businesses occurring in the course of the insured’s professional activities.

protected contract of insurance

means a contract of insurance which is covered by the policyholder protection scheme as defined in 9.2.

pure protection contracts

means:

      1. (1) a contract of long-term insurance in respect of which the following conditions are met: 
        1. (a) the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity; 
        2. (b) the contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium; and 
        3. (c) the contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with (a) or (b); or
      2. (2) a reinsurance contract covering all or part of a risk to which a person is exposed under a contract of long-term insurance.

quantification date

means the date as at which the liability of the relevant person in default is to be determined under 19.819.10.

relevant former scheme

means in relation to an article 9 default, one of the following that applied to the default before 1 December 2001:

      1. (1) the Policyholders Protection Scheme established by the Policyholders Protection Act 1975; or
      2. (2) the Friendly Societies Protection Scheme established in accordance with section 141 of the Financial Services Act 1986.

relevant general insurance contract

means any contract of general insurance other than a contract falling within any of the following classes:

      1. (1) aircraft;
      2. (2) ships;
      3. (3) goods in transit;
      4. (4) aircraft liability;
      5. (5) liability of ships; or
      6. (6) credit.

relevant person

means a person for claims against whom the policyholder protection scheme provides cover, as defined in 10.1.

remuneration

means any form of remuneration, including salaries, discretionary pension benefits and benefits of any kind.

responsible person

means (in accordance with section 3(1) of the Compensation Act 2006) a person who has negligently or in breach of statutory duty caused or permitted another person to be exposed to asbestos (including an insurer of such a person).

small business

means a partnershipbody corporate, unincorporated association or mutual association with an annual turnover of less than £1 million (or its equivalent in any other currency at the relevant time).

small self-administered scheme

means an occupational pension scheme of a kind described in article 4(4) or 4(5) of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177).

specific costs

means management expenses other than base costs.

specific costs levy

a levy, forming part of the management expenses levy, to meet the specific costs in the financial year of the compensation scheme to which the levy relates, each participant firm's share being calculated in accordance with 21.34.

stakeholder pension scheme

means a scheme that meets the conditions in section 1 of the Welfare Reform and Pensions Act 1999 or article 3 of the Welfare Reform and Pensions (Northern Ireland) Order 1999.

sub-scheme

means one of the sub-schemes to which the FSCS allocated liabilities for compensation costs prior to 1 April 2008, as described in FEES 6.5.7 R at the time.

successor

means a person for claims against whom the policyholder protection scheme provides cover, as defined in 11.1.

SUP

means the Supervision Manual of the PRA Handbook in force immediately prior to 3 July 2015.