Under the current regulatory system there are inconsistencies between the treatment of UK and EEA policyholders of UK insurers. Although policies issued by UK insurers through branches in the EEA in relation to a risk in the UK fall within the scope of the Financial Services Compensation Scheme (FSCS), policies written through branches in relation to an EEA risk fall outside the current FSCS scope.

In May 2008 the FSA consulted on proposals to amend the Compensation Sourcebook (COMP) to extend FSCS coverage to EEA risks written by the branches of UK insurers in the EEA. In particular the rule change will enable individuals who are habitually resident in an EEA state who take out life insurance through an EEA branch of a UK insurer to benefit from the FSCS regime.

The rule change took effect on 25 July and applies to insurers declared in default on or after 25 July in respect of policies issued on or after 1 December 2001.

For further information: FSA Policy Statement 08/8 Financial Services Compensation Scheme: EEA branches of UK insurers