In an earlier consultation paper, CP08/8, it was proposed by the FSA that the current tariff measure for insurance providers be altered so that it was no longer based solely on annual net premium, but also took into account the level of technical liabilities/reserves. This change was proposed to reflect the fact that firms could have significant reserves to cover existing liabilities, but have relatively low new premium income. Such firms' payments into the FSCS would not properly reflect the risk of their customers needing to make claims on the FSCS.
Having received responses from the industry, the FSA is going ahead with its proposals, and from 2010 the tariff measures for insurance providers will contain an element to reflect insurers' reserves. The split will be 75% net premium income and 25% reserves.