COMP 12.4 The compensation calculation

If the claimant has a DGD claim against an incoming EEA firm which is a credit institution, the FSCS must take account of the liability of the Home State deposit-guarantee scheme in calculating the compensation payable by the FSCS.

The FSCS may pay compensation for any claim made in connection with protected investment business which is not:

1. (1)

   a claim for property held; or

2. (2)

   a claim arising from transactions which remain uncompleted at the quantification date;

only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

The FSCS must not pay compensation for any claim in connection with protected investment business to the extent that it relates to or depends on:

1. (1)

   a failure of investment performance to match a guarantee given or representation made; or

2. (2)

   a contractual obligation to pay or promise to pay which the FSCS considers to have been undertaken without full consideration passing to the relevant person or in anticipation of possible insolvency; or

3. (3)

   the mere fluctuation in the value of an investment.

If the claimant has an ICD claim against an incoming EEA firm which is an MiFID investment firm5 (including a credit institution which is an MiFID investment firm5), the FSCS must take account of the liability of the Home State compensation scheme in calculating the compensation payable by the FSCS.

If the claimant has a claim in connection with protected investment business relating to the fact that the claimant has:

1. (1)

   while eligible or reasonably likely to become eligible to be a member of an occupational pension scheme, instead become a member of a personal pension scheme or entered into a retirement annuity; or

2. (2)

   ceased to be a member of, or to pay contributions to, an occupational pension scheme, and has instead become a member of a personal pension scheme or entered into a retirement annuity; or

3. (3)

   transferred to a personal pension scheme accrued rights under an occupational pension scheme which is not a defined contribution (money purchase) scheme; or

4. (4)

   ceased to be a member of an occupational pension scheme and has instead (by virtue of such a provision as is mentioned in section 591(2)(g) of the Income and Corporation Taxes Act 1988) entered into arrangements for securing relevant benefits by means of an annuity;

the FSCS must take the steps set out in COMP 12.4.6R.

If COMP 12.4.5R applies, the FSCS must follow the Specification of Standards and Procedures issued by the FSA in October 1994, as supplemented and modified by subsequent guidance issued by the FSA (in particular, that of November 1996) (the 'Specification') in:

1. (1)

   assessing whether a relevant person has complied with the relevant regulatory requirements;

2. (2)

   assessing whether non-compliance has caused the claimant loss; and

3. (3)

   calculating the amount of compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);

unless the FSCS considers that departure from the Specification is essential in order to provide the claimant with fair compensation.

Where a claim made in connection with protected investment business relates to an Additional Voluntary Contribution policy advised on or arranged by a relevant person, the FSCS must follow the FSAVC Review Model Guidance issued by the FSA in May 2000 (the "Guidance") in:

1. (1)

   assessing whether the relevant person has complied with the relevant regulatory requirements;

2. (2)

   assessing whether non-compliance has caused the claimant loss; and

3. (3)

   calculating the compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);

unless the FSCS considers that departure from the Guidance is essential in order to provide the claimant with fair compensation.

The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected investment business that is not an ICD claim, if it is satisfied that:

1. (1)

   there is evidence of contributory negligence by the claimant; or

2. (2)

   payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar investments with other relevant persons; and

it would be inequitable for the FSCS not to take account of (1) or (2).

The FSCS must pay a sum equal to 100% of any liability of a relevant person who is an insurance undertaking in respect of a liability subject to compulsory insurance to the claimant as soon as reasonably practicable after it has determined the relevant person to be in default.

The FSCS must calculate the liability of a relevant person to the claimant under a relevant general insurance contract in accordance with the terms of the contract, and (subject to any limits in COMP 10.2.3R) pay that amount to the claimant.

Unless the FSCS is making arrangements to secure continuity of insurance cover under COMP 3.3.1R to COMP 3.3.2ER, the FSCS must calculate the liability of a relevant person to the claimant under a long-term insurance contract in accordance with the terms of the contract as valued in a liquidation of the relevant person, or (in the absence of such relevant terms) in accordance with such reasonable valuation techniques as the FSCS considers appropriate.2

1. (1)

   2Unless the FSCS is seeking to secure continuity of cover for a relevant person under COMP 3.3.1 R to COMP 3.3.2E R, it must:

   1. (a)

      pay compensation in accordance with COMP 12.4.11 R for any benefit provided for under a protected long-term insurance contract which has fallen due or would have fallen due under the contract to be paid to any eligible claimant and has not already been paid; and

   2. (b)

      do as soon as reasonably practicable after the time when the benefit in question fell due or would have fallen due under the contract (but subject to and in accordance with any other terms which apply or would have applied under the contract).

2. (2)

   If the FSCS decides to treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R then, for the purposes of (1), the value of benefits falling due after the date of that decision must be treated as reduced or disregarded to that extent.

3. (3)

   Unless it has decided to treat the liability of the relevant person under the contract as reduced or disregarded under COMP 12.4.14 R the FSCS must not treat as a reason for failing to pay, or for delaying the payment of compensation in accordance with (1), the fact that:

   1. (a)

      it considers that any benefit referred to in (1) is or may be excessive in any respect; or

   2. (b)

      it has referred the contract in question to an independent actuary under COMP 12.4.13 R; or

   3. (c)

      it considers that it may at some later date decide to treat the liability of the relevant person under a contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R;

   save where the FSCS decides to exclude certain benefits to the extent that they arise out of the exercise of any option under the policy (for this purpose option includes, but is not restricted to, a right to surrender the policy).

The FSCS must not treat any bonus provided for under a long-term insurance contract as part of the claimant's claim except to the extent that:

1. (1)

   a value has been attributed to it by a court in accordance with the Insurers (Winding Up) Rules 2001 or any equivalent rules or legislative provision in force from time to time; or

2. (2)

   the FSCS considers that a court would be likely to attribute a value to the bonus if it were to apply the method set out in those rules.2

1. (1)

   If the FSCS is:

   1. (a)

      seeking to secure continuity of cover under COMP 3.3.1 R to COMP 3.3.2E R or to calculate the liability owed to an eligible claimant under COMP 12.4.11 R; and

   2. (b)

      considers that the benefits provided for under a protected long-term insurance contract are or may be excessive in any respect,

   it must refer the contract to an actuary who is independent of the eligible claimant and of the relevant person.

2. (2)

   In this rule and in COMP 12.4.14 R, a benefit is only "excessive" if, at the time when the relevant person decided to confer or to offer to confer that benefit, no reasonable and prudent insurer in the position of the relevant person would have so decided given the premiums payable and other contractual terms.2

If the FSCS is satisfied, following the actuary's written recommendation, that any of the benefits provided for under the contract are or may be excessive, it may treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded for the purpose of any payment made after the date of that decision.2

The FSCS may rely on the value attributed to the contract by the actuary when calculating the compensation payable to the claimant, or when securing continuity of cover.

3For claims arising in connection with protected contracts of insurance, the FSCS must treat any term in an insurance undertaking's constitution or in its contracts of insurance, limiting the undertaking's liabilities under a long-term insurance contract to the amount of its assets, as limiting the undertaking's liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.

31The FSCS may pay compensation for any claim made in connection with protected home finance mediation 4only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

31The FSCS must not pay compensation for any claim in connection with protected home finance mediation 4to the extent that it relates or depends on:

1. (1)

   a failure of investment performance to match a guarantee given or representation made; or

2. (2)

   the mere fluctuation in the value of property

1The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected home finance mediation4 if it is satisfied that there is evidence of contributory negligence by the claimant and it would be inequitable for FSCS not to take account of that fact.

3The FSCS may pay compensation for any claim made in connection with protected non-investment insurance mediation only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

3The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected non-investment insurance mediation if it is satisfied that:

1. (1)

   there is evidence of contributory negligence by the claimant; or

2. (2)

   payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar contracts with other relevant persons; and

it would be inequitable for FSCS not to take account of (1) or (2).

6For a claim which falls to be dealt with (or has properly been dealt with) under a consumer redress scheme, the FSCS must apply the scheme in:

1. (1)

   assessing whether a relevant person has complied with the relevant regulatory requirements;

2. (2)

   assessing whether non-compliance has caused the claimant loss; and

3. (3)

   calculating the compensation due (where the FSCS may rely on calculations made by the FSA or other competent persons acting on the FSA's behalf or authorised to make them under the scheme);

   unless the FSCS considers that departure from the scheme is essential in order to provide the claimant with fair compensation.