COMP 1.5 Application to Lloyd's
The FSA has exercised its power under section 316 of the Act (Direction by Authority) to direct inLLD 8A (Compensation Arrangements for policyholders) that certain core provisions in the Act should apply to members of the Society of Lloyd's (an "insurance market direction"). The effect of the direction is that the FSA may, in relation to members, and in respect of insurance market activities carried on by them, exercise any of the statutory powers conferred by the provisions which are applied by the direction. Those include the powers in Part X to make general rules and give guidance and also the powers in Part XV to make rules for the establishment and operation of a compensation scheme. Accordingly this sourcebook makes provision for the payment of compensation by the FSCS in certain cases arising from insurance business carried on by members, and for raising levies on the Society.
Notwithstanding anything to the contrary in this sourcebook, in relation to the Society, members and Lloyd's policies FSCS must act, so far as is reasonably practicable, to ensure that:
- (1)
Eligible claimants have protection under this sourcebook in relation to Lloyd's policies equivalent to that otherwise afforded to eligible claimants by the FSCS;
- (2)
FSCS does not meet claims in relation to Lloyd's policies unless the Central Fund is unlikely to be able to meet them;
- (3)
Claims against members under the compensation scheme which arise from the same loss under the same Lloyd's policy must be treated as a single claim;
- (4)
any recovery resulting from the exercise of any rights assigned to the FSCS in connection with the payment of compensation to an eligible claimant, is treated by the FSCS in accordance with COMP 7.2.4 R, and any such recovery which is not paid to the claimant in accordance with that rule, is used for the benefit of FSCS in priority to any interest that the Society may have.
The effect of COMP 1.5.2 R(4) and COMP 7.2.4A R, and subject to COMP 7.2.4 R(2), is that any recovery obtained by FSCS is retained by FSCS up to an amount equal to the cost to FSCS of paying compensation. To the extent that the Society is entitled to any part of the recovery (for example by agreement with FSCS) it is only paid out of any excess up to a maximum amount equal to that paid out of the Central Fund. Any recovery in excess of the compensation (including payment from the Central Fund) received by the policyholder is paid to the claimant in accordance with COMP 7.2.4 R regardless of whether the Society receives the full amount paid from the Central Fund.