Financial Services and Markets Act 2023

PART 4 U.K. Write-down orders: financial services compensation scheme

4 U.K. Part 15 of FSMA 2000 (the Financial Services Compensation Scheme) is amended as follows.

Commencement Information

I1 Sch. 12 para. 4 in force at 29.8.2023, see s. 86(2)(e)

5 U.K. After section 217 (insurers in financial difficulties) insert—

“217ZA Insurers subject to write-down orders

(1) The compensation scheme must include provision requiring the scheme manager to take specified measures for safeguarding policyholders affected by write-down orders.

(2) A person (“P”) is a policyholder affected by a write-down order if—

(a) P is a policyholder of an insurer in respect of whom a write-down order has effect, and

(b) the value of any thing to which P is (or may become) entitled, in P’s capacity as a policyholder of the insurer, is reduced under the write-down order.

(3) Measures specified by virtue of subsection (1) must, in particular, require financial assistance to be given to insurers subject to write-down orders for the purpose mentioned in subsection (4).

(4) The purpose is to enable payments to be made to affected policyholders in respect of the reduction in value of their entitlements (or contingent entitlements), as mentioned in subsection (2)(b).

(5) Financial assistance given under this section—

(a) must not be used for any purpose other than the purpose mentioned in subsection (4);

(b) is not to be taken into account, to any extent, in valuing the assets of the insurer for any purpose.

(6) Measures taken by the scheme manager by virtue of this section are in addition to any measures the scheme manager may take under powers provided by virtue of section 217(1).

(7) In this section and section 217ZB—

• “insurer” means a relevant person who has permission to carry out contracts of insurance;

• “write-down order” means an order under section 377A (as it has effect in accordance with section 377H).

217ZB Recovery of financial assistance under section 217ZA

(1) The compensation scheme may make provision giving the scheme manager a right of recovery in respect of financial assistance given to an insurer by virtue of section 217ZA.

(2) Any right of recovery the scheme manager has in respect of financial assistance given to an insurer by virtue of subsection (1) must not be exercised against a policyholder of the insurer.

(3) Subsection (4) applies where, by virtue of subsection (1), the scheme manager has a right of recovery in respect of financial assistance given to an insurer.

(4) In valuing the insurer’s liabilities for the purposes of a relevant insolvency provision, no account is to be taken of any expectation that the right will be exercised.

(5) In subsection (4), “relevant insolvency provision” has the same meaning as in paragraph 9 of Schedule 19B (treatment of written-down liabilities for purposes of relevant insolvency provisions).”

Commencement Information

I2 Sch. 12 para. 5 in force at 29.8.2023, see s. 86(2)(e)

6 U.K. In section 219 (scheme manager’s power to require information), in subsection (1A), after paragraph (b) insert—

“(ba) on a person (P) who is an insurer who has been given financial assistance under section 217ZA,”.

Commencement Information

I3 Sch. 12 para. 6 in force at 29.8.2023, see s. 86(2)(e)

7 U.K. After section 220 (scheme manager’s power to inspect information held by liquidator etc), insert—

“220A Power to inspect information held by write-down manager

(1) For the purpose of assisting the scheme manager to discharge its functions under section 217ZA or 217ZB in relation to an insurer, a person to whom this section applies must permit a person authorised by the scheme manager to inspect relevant documents.

(2) This section applies to a person appointed under section 377G to act as the manager of a write-down order which has effect in relation to the insurer.

(3) A person inspecting a document under this section may take copies of, or extracts from, the document.”

Commencement Information

I4 Sch. 12 para. 7 in force at 29.8.2023, see s. 86(2)(e)