Insurance Times has called on the government to underwrite immediate payment of all insurance claims from Independent Insurance policyholders which are not covered by the Policyholders Protection Board (PPB).
The PPB will pay out 90% of claims from personal policyholders and will also pay out 100% for compulsory insurance claims, notably third-party motor and employers' liability.
The great majority of commercial claims are not covered by the PPB. This includes material damage and business interruption claims. That leaves many businesses with outstanding claims which have no realistic chance of being met. Businesses with large outstanding claims may have to wait for a year to get any money at all and there is no likelihood that the liquidators will have adequate funds to pay claims in full. Meanwhile, the affected firms may go out of business, causing severe social and economic damage.
In a letter to Robin Fellgett, Treasury financial sector director, Insurance Times said: “We believe the government has a duty to step in as insurer of last resort. Prompt action now will enable firms to continue in business, employees to continue in work, will avoid needless social and economic damage, and will reduce costs which will otherwise fall on the social security system or be dissipated in legal fees.
“Under the proposed scheme, the Government would appoint an insurer to settle claims, and would pay the cost of the claims and the administration. The Government would then recover from the liquidators any amounts which the claimants would have been paid by the liquidators.”