European group pushes for insurance guarantee plan

Brussels is pondering the introduction of a compensation scheme to cover policyholders across Europe in the event of a major insurer going bust.

The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has published a report for the European Commission highlighting the fact that some European countries do not currently have an insurance guarantee scheme. It recommended that all European countries should have a national compensation scheme, set up under European regulation.

The Commission will consider the report, though the Financial Services Compensation Scheme (FSCS) said it was not currently on the agenda.

The Commission wants to avoid another situation such as that created by the collapse of Independent Insurance in 2001, when Spanish brokers who had issued policies were left out of pocket and some claims by Spanish policyholders were left unpaid.

ABI director of financial regulation and taxation Peter Vipond said: “Some policyholders who bought insurance with Independent through an agent or branch somewhere in Spain, rather than in the UK, were not covered. That is clearly a situation they want to avoid.”

If a UK insurer failed, the FSCS would compensate foreign policyholders “in some cases”, but this could be broadened under the new proposals.