The Policyholders Protection Board (PPB) will be wound up in November, when it will be swallowed by the new Financial Services Compensation Scheme (FSCS).
The PPB is one of seven compensation bodies that will meld to create the FSCS, which has been in development since February and will move into new buildings in Lloyd's Chambers next week.
But FSCS spokeswoman Suzette Brown said any levy for the insurance industry was yet to be set, although in theory the annual bill could be up to 1% of net written premiums, which is the level that was set by the PPB in the past.
The industry is facing a massive bill for the collapse of Chester Street Insurance, which was put into liquidation earlier this year, leaving thousands of asbestos-related claims in the pipeline.
In May the Treasury announced that the PPB would pay 100% compensation to Chester Street victims if the compensation award was made before the company's liquidation on January 9.
If the award was made after January 9, the insurance industry was to pay 90% compensation, up to the FSCS's expected opening in November.
The compensation period between January and November alone is expected to cost the insurance industry around £5m.
Brown said all seven schemes – the PPB, the Building Society Investor, Deposit and Friendly Society protection schemes, the Investors Compensation Scheme, the Section 43
Scheme and the Personal Investment Authority Scheme – would continue to exist until the FSCS officially opened.
Brown said many people in the financial services industry were as yet unaware of its existence, although it already has more than 100 staff.
“We're planning to do a number of events, such as industry presentations, to let people know who we are and what we do,” she said.