Recent proposals to amend insolvency rules applying to insurers aim to enhance and clarify existing powers for a court-ordered write-down of an insurer’s policy and other contractual liabilities under section 377 FSMA. Other proposed measures include:
- a moratorium on certain contractual termination rights in service contracts and financial contracts to which insurers are party;
- a suspension on policyholder surrender rights under life insurance policies; and
- changes to the FSCS to ensure that policyholders are not disadvantaged if their policies are written down.
In “Amendments to the Insolvency Arrangements for Insurers: Consultation“, HM Treasury (“HMT“) notes that, although UK institutions have played an active role in the development of international resolution standards, the UK has not yet fully adopted these updated standards. HMT and the Bank of England are expected to develop a specific resolution regime for insurers in due course, which should complement these proposed insolvency reforms.
The deadline for responses to the consultation is 13 August 2021.
For a more detailed overview of the consultation proposals, please see our briefing here.