The chief executive of the Financial Services Compensation Scheme has said it is exploring a number of options over the failure of a PI insurer.
Last month the FSCS declared Enterprise Insurance Company in default and said it was working closely with its liquidator.
Mark Neale said that in some respects protecting the clients of failed insurance companies is much more demanding than the protection of depositors in a failed bank, building society or credit union.
He said: “Enterprise Insurance illustrates well exactly why that it is. Where protection for depositors is single-mindedly about returning deposits within our £75,000 limits, protection for policyholders is multi-faceted - as multi-faceted in fact as the policies themselves.
“The FSCS’ first obligation is to meet live claims under these policies. That is essential to getting businesses and individuals back on their feet after an insured risk, like a motor accident, has occurred.
“Then there is the issue of carrying on of cover for all those customers of Enterprise who do not have current claims, but expect their policies to safeguard them against important risks.”
Mr Neale said there were 11,000 live claims when Enterprise failed and the FSCS worked with the insolvency practitioner to establish a claim handling service within a week of its failure.
For those without live claims but who expect their cover to continue, the FSCS can either transfer the policies to another provider, help finance the brokering of new policies or pay compensation for the unexpired portion of the policy so they can take out a new one.
Mr Neale said: “We are now actively engaged in exploring exactly these kinds of options in the case of Enterprise.
“I make no promises, but the FSCS will always try, if it can, to protect policyholders through seamless (as far as possible) cover – provided, of course, we can justify the costs (as against the cost of the a return of premium).
“The failure of a general insurer is the signal for the FSCS to take swift and sometimes bold action.
“Enterprise Insurance sold its policies in many jurisdictions. I am not aware that any has acted as quickly and decisively as the FSCS in the UK to protect policy holders.”
