The Financial Services Compensation Scheme handed a belated Christmas present to the insurance industry yesterday, returning more than pounds 40m in unneeded levies, claiming it was unlikely the industry would have to pay any levy for the coming financial year.
The FSCS was set up four years ago to provide compensation for customers of financial services organisations that go bust, charging different levies to each sub-sector of the industry depending on the anticipated level of payouts in any one year.
The general insurance industry has been particularly hard hit in recent years, due mainly to the collapse of Independent Insurance in 2001. Since the FSCS's creation, it has demanded levies from the sector of pounds 325m.
But in a statement yesterday, the body said having reclaimed more money from defunct institutions than it had budgeted for, it was now in a position to hand back cash to insurers.
The FSCS has paid out more than pounds 400m in compensation to clients of bust general insurers since 2001. It has reclaimed pounds 300m from the estates of the defunct companies.
Commenting on yesterday's announcement, Loretta Min-ghella, the chief executive of the FSCS, said: "This is great news for insurance firms. In recent years, the general insurance sector has had to pay significant amounts for compensation payments relating to the defaults of insurers such as Independent, Chester Street, Drake and Kwelm. …