Brokers will not have to foot the bill for policies paid to collapsed insurer Independent Insurance by credit card, according to the provisional liquidator.

The Financial Services Compensation Scheme (FSCS) had written to Independent policyholders, advising those who paid their premiums through a broker by credit card, to pursue their credit card company to recover premiums owed, rather than from the FSCS.

IIB director general Andrew Paddick said many policyholders took this advice and, after refunding premiums to policyholders, the credit card companies in turn sought to claw back the funds by debiting brokers.

In response to a broker inquiry, Aurora Corporate Services, the run-off manager for Independent, wrote that in the event of a clawback brokers would not be able to pursue Independent or the FSCS to recover the debt, because they had been debited under the terms of their agreements with credit card companies.

But in a letter to the IIB, joint provisional liquidator for Independent Insurance Dan Schwarzmann said even if they had received the premium back from their credit card company, policyholders were still unsecured creditors of Independent.

He said, in such cases, brokers with a satisfactory assignment of debt from the policyholder could claim for a return of the premium, and Independent would recognise the broker as the payee of the debt.

"This is of enormous significance. If this had gone unresolved, brokers couldn't have risked taking credit cards any more because, if an insurer went bust, they would be left to pick up the bill," Paddick said.