EEA Authorised Insurers – Not All Insurers are the Same!
25 March 2011
By Ed Tomlinson, Financial Planner
For an insurance company to provide periodical payments as part of a settlement they must be deemed secure by the Courts. The rules which determine whether an insurance company can be deemed secure are set out in section 2 of the Damages Act.
(4) For the purpose of subsection (3) the continuity of payment under an order is reasonably secure if;
(a) it is protected by a guarantee given under section 6 of or the Schedule to this Act,
(b) it is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or
(c) the source of payment is a government or health service body.
The scheme which satisfies section 4(b) is the Financial Services Compensation Scheme (FSCS). For an insurance company to be protected by the FSCS they must be authorised and regulated by the Financial Services Authority (FSA). An insurer based in the UK must be regulated by the FSA to offer general insurance and is therefore deemed secure by the Courts. However, due to the opening of financial markets in the European Economic Area, more and more insurance companies who are not UK-based are providing motor insurance into the UK market.
For firms based outside the UK, it is necessary to ascertain they have the relevant FSA authorisation to ensure that any periodical payment provided by them would be deemed secure by the Courts. The authorisation of an insurance company can be checked on the FSA register. It is also necessary to ensure that the claimant is an eligible claimant, the claim is a protected claim and it is made against a relevant person in default, all as defined by the FSA.
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