The FSA has published a consultation paper to seek views on proposals to modify the scope of the FSCS as it applies to business written through EEA branches of UK insurers. Click here to read the consultation paper.
At present under the application of the FSCS, inconsistencies apply between the treatment of UK and EEA policyholders. Currently, a contract of insurance issued by a UK insurance undertaking through an establishment in another EEA State in relation to a UK risk is within the scope of the FSCS. But in contrast, a contract of insurance issued by a UK insurance undertaking through an establishment in another EEA State in relation to an EEA risk is outside the scope of the FSCS.
The FSA proposes to amend the Compensation sourcebook (COMP) to extend the coverage of the FSCS scheme so that UK and EEA risks written under long-term or general insurance policies issued through EEA branches of UK insurers are treated in the same way as regards eligibility for FSCS.
In particular, the FSA wishes to bring those policyholders of life insurance contracts who are habitually resident in an EEA State other than the UK within the scheme.
The FSA propose the change should apply to insurance companies declared in default on or after the rule change has been made in respect of policies issues on or after 1 December 2001 when the FSCS was established under the Financial Services and Markets Act 2000.
The FSA will run this consultation for one month, instead of the usual three months, and any responses should be received by the 9 June 2008. Click here for an online response form.
