After multiple extensions to find replacement cover for customers on 10-year latent defect policies, the FSCS today said policyholders couldn’t wait any longer 

The Financial Services Compensation Scheme (FSCS) is to compensate Alpha Insurance latent defect premium insurance policyholders following the collapse of a deal to find them replacement cover.

It has directly compensated 14,000 customers with 10-year latent defect/structural damage insurance policies underwritten by failed Danish insurer Alpha, and bought from CRL – an appointed representative of BCR Legal Group Ltd. It will also write to the remaining 6,500 policyholders within the next two weeks with instructions on what steps the policyholders must take to submit their claim.

BCR and CRL had been working with the FSCS to find a replacement carrier to provide cover for Alpha’s 10-year latent defect/structural damage insurance policies. After multiple deadline extensions from the FSCS, a deal was thought to have been struck, only for it to fall back into jeopardy.

’Very disappointed’

The policies had lapsed on 11 August in accordance with Danish law. After the confirmed collapse of the replacement cover deal today, the FSCS said that “policyholders cannot be expected to wait any longer”.

Jimmy Barber, chief operating officer at FSCS, said: “Despite exhaustive efforts of FSCS and other parties, it has not been possible to transfer these Alpha latent defect policies to another insurer. Therefore, FSCS is paying return of premiums to eligible customers.

“We are very disappointed that on this occasion we have been unable to reach the desired outcome for our customers, due to the complexity of the issues around obtaining replacement cover so will be paying return of premium.

“In some cases we do face data challenges. Going forward, as part of the Prepare pillar of FSCS’s strategy for the 2020s, we are working with the insurance industry to help improve how better data can be provided to us in the event of an insurance failure. This will enable us to protect our customers in a timely fashion.”

Once the insurance premium refund has been paid, FSCS instructed that policyholders should seek professional advice on obtaining replacement cover as soon as possible by contacting a broker who specialises in latent defect/structural damage policies.

It warned policyholders may be in breach of their mortgage terms and conditions if they do not have a valid latent defect policy for their property.