Limits on the amount of compensation payable

Part

COMP Compensation Sourcebook

Chapter

Limits on the amount of compensation payable

Printed on: 05/07/2024

Rulebook at: 06/08/2009

COMP 10

Limits on the amount of compensation payable

COMP 10.1

Application and Purpose

01/12/2004

Application

COMP 10.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 10.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 10.1.3

In most cases it is appropriate for there to be a limit on the amount of compensation payable by the FSCS and that there should be some part of the claim which is not compensatable and for which the claimant must bear the loss. The purpose of this chapter is to set these limits out.

01/12/2001

COMP 10.1.4

The chapter also sets out the limit on the level of protection the FSCS must seek to secure when the FSCS is ensuring that there is continuity of insurance cover.

01/12/2001

COMP 10.2

Limits on compensation payable

01/12/2004

COMP 10.2.1

The limits on the maximum compensation sums payable by the FSCS for protected claims are set out in COMP 10.2.3 R.

01/12/2001

COMP 10.2.2

The limits apply to the aggregate amount of claims in respect of each category of protected claim that an eligible claimant has against the relevant person. Consequently, a claimant who has, for example, a claim against a relevant person in connection with protected investment business of £30,000 , and a further such claim of £20,000, will not receive 100% compensation for both claims; instead he will receive £48,000 (100% of the first £30,000 and 90% of the next £20,000). Similarly, if a claimant receives more than one payment in respect of a claim or claims on one or more protected contract of insurance, the claimant will only receive 100% of the first £2,000 of the total paid, and not 100% of the first £2,000 of each payment.

01/10/2007

COMP 10.2.3

Table Limits

This table belongs to COMP 10.2.1R

Type of claim

Level of cover

Maximum payment

Protected deposit or protected dormant account

100% of claim

£50,000 or 50,000 Euros whichever is the greater on the date the relevant person is determined to be in default or the date the protected deposit was due and payable, if later.
[Note: article 7(1) of the Deposit Guarantee Directive]
(see also below for building society and other mutual society mergers(COMP 10.2.10 R) and protected deposit transfers under the special resolution regime (COMP 10.2.11 R))

Protected contract of insurance when the contract is a relevant general insurance contract

(1) Where the claim is in respect of a liability subject to compulsory insurance : 100% of claim

Unlimited

(2) Where the claim arises under the Third Party (Rights against Insurers) Act 1930, is in respect of a liability within COMP 5.4.5R(1)(b), and is in connection with an Article 9 default: 90% of the . claim

Unlimited

(3) In all other cases:
100% x first £2,000
90% of remainder of the claim.

Unlimited

Protected contract of insurance when the contract is a long-term insurance contract

100% x first £2,000 At least 90% of the remaining value of the policy as determined in accordance with COMP 12.

Unlimited

Protected investment business

100% x first £30,000 90% x next £20,000

£48,000

Protected home finance mediation

100% x first £30,000
90% x next £20,000

£48,000

Protected non-investment insurance mediation

(1) where the claim is in respect of a liability subject to compulsory insurance : 100% of claim

Unlimited

(2) In all other cases: 100% x first £2000 90% of the remainder of the claim

Unlimited

06/08/2009

COMP 10.2.4

COMP 12 sets out the rules the FSCS will follow when calculating the amount of compensation payable.

01/12/2001

COMP 10.2.5

COMP 12.4.1 R and COMP 12.4.4 R include further limits relating to Deposit Guarantee Directive claims and ICD claims against certain incoming EEA firms. These reflect the Deposit Guarantee Directive and Investor Compensation Directive/s, under which compensation may be payable by the incoming EEA firm's Home State compensation scheme.

01/11/2007

Continuity of insurance cover

Claims against more than one member in respect of a single protected contract of insurance to be treated as a single claim

COMP 10.2.8

In applying the financial limits in COMP 10.2, and in calculating theamount of a claim in respect of a protected contract of insurancearising from the default of one or more members, a policyholder is to be treated as having a single claim for the aggregate of all such amounts as may be payable on the claim in respect of the protected contract of insurance.

01/01/2004

Claims arising under COMP 3.2.4 R

COMP 10.2.9

If a firm has a claim under COMP 3.2.4 R, the FSCS must treat the share of the shortfall of each customer as if it were a protected claim for the purposes of calculating the limits of compensation payable, within COMP 10.2, in relation to that customer.

14/01/2005

Building society and other mutual society mergers

COMP 10.2.10

(1) This rule applies from 1 December 2008 to 30 September 2009.

(2) In the event of a merger between two building societies or a building society and the subsidiary of another mutual society (whether or not of the same type), there is a separate and additional £50,000 maximum payment limit for a claimant with respect to claims for protected deposits held under the name of the dissolved entity provided the following conditions are satisfied:

(a) the merger takes effect between 1 December 2008 and 30 September 2009;

(b) the successor entity has notified the FSA before the merger takes effect that it wishes this rule to apply;

(d) the successor entity continues to operate the business of the dissolved entity under the name of the latter.

[Note: The FSA will publish the names of any successor entity and the relevant name to which a separate £50,000 limit applies.]

(3) A successor entity to which this rule applies must make and retain a written record of potential claimants for whom the separate limit applies.

(4) In this rule "mutual society" and "subsidiary" have the same meanings as in the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007.

29/03/2009

Protected deposit transfers under the special resolution regime

COMP 10.2.11

(1) This rule applies from 16:00 on 29 March 2009 to 30 September 2009.

(2) In the event of a transfer of protected deposits from one deposit-taking firm to another deposit-taking firm pursuant to the property transfer powers under the Banking Act 2009, there is a separate and additional £50,000 maximum payment limit for a claimant with respect to claims for protected deposits held under the name of the transferor provided the following conditions are satisfied:

(a) the transfer takes effect between 16:00 on 29 March 2009 and 30 September 2009;

(b) the transferee has notified the FSA before the transfer takes effect that it wishes this rule to apply;

(c) before the transfer took effect, the claimant had a protected deposit with each of the transferor and the transferee; and

(d) the transferee continues to operate the business relating to the transferred protected deposits under the name of the transferor (or such part of the name as is permitted by law).

[Note: The FSA will publish the names of any transferee and the relevant name to which a separate £50,000 limit applies.]

(3) A transferee to which this rule applies must make and retain a written record of potential claimants for whom the separate limit applies.

29/03/2009

Claims in respect of protected dormant accounts

COMP 10.2.12

In the event of a default of a dormant account fund operator, the FSCS will pay compensation in accordance with COMP 10.2.3 R on the basis of the authorisation of the relevant person who was liable for the protected deposit immediately prior to the liability being transferred to the dormant account fund operator (and the relevant authorisation of the relevant person is the authorisation that was in place at the time that the liability was transferred).

06/08/2009

COMP 10.2.13

The purpose of COMP 10.2.12 R is to ensure that persons whose balances in a dormant account have been transferred to a dormant account fund operator do not have their entitlement to compensation reduced in the event of default of the dormant account fund operator. So, a person who held dormant accounts with two different relevant persons, the liability for which were then automatically transferred to the dormant account fund operator, could still be compensated by the FSCS on the basis of accounts with two separate relevant persons (and so could receive up to 2 x £50,000in compensation) rather than just one account with one relevant person.

06/08/2009