Policyholder Protection

Consultation Paper 21/14
Published on 06 October 2014


This consultation paper (CP) sets out proposed changes to the Prudential Regulation Authority’s (PRA’s) rules for insurance policyholder protection. These proposals aim to align the existing insurance compensation rules more closely with the PRA’s statutory objectives, and will contribute to the future operational effectiveness of the Financial Services Compensation Scheme (FSCS) in providing continuity of cover, payment of benefits falling due and compensation in the event of the failure of an insurance firm.

This CP is relevant to UK insurers (including those that establish a branch or operate on a freedom of services basis in the EEA) as well as EEA insurers that establish a UK branch or operate in the UK on a freedom of services basis, and Channel Islands insurers and Isle of Man insurers (PRA-authorised insurers). It is also relevant to firms who have assumed responsibility for liabilities from PRA-authorised insurers (successors), the FSCS, the Society of Lloyd’s, and policyholders.

Summary of the proposals

  • FSCS insurance limits: There are increased limits for compensation for certain insurance products to reflect the significance to policyholders of the risk insured and the consequences of cover being withdrawn.
  • Successor firms: FSCS protection will be provided post-transfer for policyholders who have outstanding protected claims against an insurer whose claims were covered by the FSCS before their policies transferred to a successor firm.
  • Assignment and subrogation: The FSCS will be given flexibility in the way it seeks recoveries from failed insurers and third parties after paying out compensation, through new powers of automatic and electronic assignment and automatic subrogation of policyholders’ rights.

Appendices to the CP include proposed changes to the PRA Rulebook and a draft statement of policy.

Readers may also wish to refer to Depositor protection – CP20/14, The implementation of ring-fencing: consultation on legal structure, governance and the continuity of services and facilities - CP19/14, and Ensuring operational continuity in resolution – DP1/14 also published on Monday 6 October 2014.


The consultation closed on Tuesday 6 January 2015.

PDFConsultation Paper 21/14

PDFPress release

Other prudential regulation releases