Insurers face FSCS fund hike
The Financial Conduct Authortity (FCA) has proposed reforms to the way the Financial Services Compensation Scheme (FSCS) is funded which will see insurers contribute more.
The regulator wants insurance providers to pay 25% of the lifeboat fund’s compensation costs, and has proposed moving pension and investment funding classes together.
A previous FCA consultation paper put forward the idea of asking providers for more money to fund the FSCS. This received 193 responses, of which 175 supported the idea.
‘Some respondents, mostly product providers and their representatives, strongly opposed this proposal and questioned its legality,’ the FCA stated. ‘We see the introduction of provider contributions as an extension of these drives to improve accountability across the supply chain for appropriate distribution.’
However, speaking to Post ABI director general, Huw Evans argued that the plans to make insurers pay go ‘against the fundamental principles of FSCS funding’. He said, ‘The FCA’s proposal gets the balance wrong and seems to go against the fundamental principles of FSCS funding – that those responsible for the failures are the ones who pay.’
The current FSCS scheme is funded by a levy on financial firms, with the size of the levy generally corresponding to the size of the firm rather than actual risks it poses. This year’s levy totals £353m.
The FCA consultation closes on 30 January 2018 with a policy statement expected in the second quarter of that year.