The government is consulting on amendments to the insolvency arrangements for insurers, with a view to enabling UK authorities to better manage insurer distress.
The government is proposing a series of targeted amendments to the current insurer insolvency arrangements, including:
- Clarifications and enhancements to the court’s existing power, under section 377 of the Financial Services and Markets Act 2000 (FSMA), to order a reduction of the value of an insurer’s contracts (a ‘write-down’);
- The introduction of new provisions to help mitigate business disruption and losses for insurers in distress; and
- A change to the protection provided by the Financial Services Compensation Scheme (FSCS) in the event of a write-down under section 377 FSMA.
These amendments would promote continuity of cover for policyholders by allowing earlier intervention by the regulatory authorities when an insurer is suffering financial distress, reduce costs to industry, and help maintain public confidence in the UK’s insurance sector.
The consultation closes on 13 August 2021.