The Financial Services Compensation Scheme (FSCS) has been compensating eligible policyholders of Independent Insurance Company Limited (IICL) for over 13 years. In that time we have paid compensation of more than £405m.
IICL was a large general insurer and its insolvency presented a number of complex problems that the joint provisional liquidators (JPLs) of IICL had to resolve. FSCS has worked closely with the liquidators on protecting policyholders. In order to close the estate, the liquidators are now proposing a scheme of arrangement (scheme) for IICL.
The scheme is between a company and its creditors and needs to be approved by the High Court. The scheme proposed by the liquidators will allow a dividend to be paid to FSCS and non-FSCS protected creditors in respect of the claims against IICL. It will also allow the estate to close once all assets have been distributed.
In accordance with the usual practice, FSCS and the joint provisional liquidators have agreed that under the scheme, FSCS will continue to protect the policyholders and third parties who are eligible for FSCS protection, but whose claims have not been finalised. The scheme allows FSCS to continue to pay the protected claims of eligible persons even after the payment of a final dividend to FSCS and non-FSCS protected creditors. The dividend to FSCS will include an amount for these future claims payments.
In January 2015 the JPLs issued a practice statement letter detailing their intention to propose a scheme. This and further information is available on the IICL website: www.independent-insurance.co.uk.
When IICL went into default, the protection regime in place was the Policyholders Protection Act 1975 (PPA), managed by the Policyholder Protection Board (PPB). In December 2001, FSCS took over the responsibilities of the PPB.
Policyholders of IICL protected by FSCS under the terms of the PPA are restricted to:
- Private individuals,
- Any policyholder for claims under certain compulsory insurances such as motor third party risks or employers’ liability. The PPA coverage applicable to IICL was also extended for employers’ liability in particular under the FSCS COMP rules.