General scope of the Board’s functions
For section 3 of the 1975 Act there shall be substituted—
Schedule 1 to this Act (consequential amendments) shall have effect.
For section 4 of the 1975 Act there shall be substituted—
Schedule 2 to this Act (consequential amendments) shall have effect.
This section shall not have effect in relation to a policy, or security, where the contract which the policy evidences, or which governs the security, was entered into before the day on which this section comes into force.
For the purposes of subsection (3) above, where a contract for a term of more than one year—the contract shall be treated as having been entered into on that anniversary, unless the effecting of the contract constituted the carrying on of long term business (within the meaning of the Insurance Companies Act 1982).
was entered into before the day on which this section comes into force, and
continues in force beyond an anniversary of its inception which falls on or after the day on which this section comes into force,
Companies in financial difficulties
Section 16 of the 1975 Act (which enables the Board to take measures to protect policyholders of companies in financial difficulties) shall be amended as follows.
In subsection (2) (under which the Board’s powers are exercisable for the purpose of safeguarding policyholders of a company in financial difficulties who are eligible for protection under the section)—
for “policyholders of a company in financial difficulties who are eligible for protection under this section” there shall be substituted “ those who are qualifying persons in relation to a company in financial difficulties ”, and
for “such policyholders” there shall be substituted “ such persons ”.
In subsection (3) (power to secure or facilitate transfer of business of company in financial difficulties on terms including reducing liabilities or benefits under any policies), for the words from “the liabilities” to “policies)” there shall be substituted “ any of the things to which any of those who are qualifying persons in relation to the company in financial difficulties are entitled in their capacity as such) ”.
In subsection (5) (power to assist company in financial difficulties conditionally on reduction of liabilities or benefits under any of its policies), for the words from “any liabilities” to “the company” there shall be substituted “ of the things to which any of those who are qualifying persons in relation to the company are entitled in their capacity as such ”.
In subsection (8) (restriction on exercise of powers)—
for “any policyholders of” there shall be substituted “ any of those who are qualifying persons in relation to ”, and
for “the policyholders” there shall be substituted “ the persons ”.
After subsection (8B) there shall be inserted—
After subsection (9) there shall be inserted—
Section 16 of the 1975 Act shall be amended as follows.
In subsection (1) (definition of company in financial difficulties), in paragraph (c) (application made for sanctioning compromise or arrangement providing for reducing liabilities or benefits under company’s policies), after “reducing” there shall be inserted “ , or deferring payment of, ”.
In subsection (3) (power to secure or facilitate transfer of business of company in financial difficulties on terms including reducing entitlements of qualifying persons), after “reducing” there shall be inserted “ , or deferring payment of, ”.
In subsection (5) (power to assist company in financial difficulties conditionally on reduction of entitlements of qualifying persons), after “reduction of” there shall be inserted “ , or the deferment of the payment of, ”.
In section 16 of the 1975 Act, after subsection (8) (which prevents the Board taking measures under subsection (3) or (4) if it appears to them that it would cost them less if the company went into liquidation) there shall be inserted—
In the 1975 Act, after section 17 there shall be inserted—
Schedule 3 to this Act (consequential amendments of the 1975 Act) shall have effect.
Levies on insurance companies
Section 21 of the 1975 Act (power to impose levies) shall be amended as set out in subsections (2) to (9) below.
In subsection (1) (general business levy), for the words from “authorised” to “United Kingdom” there shall be substituted.
In subsection (2) (long term business levy), for the words from “authorised” to “United Kingdom” there shall be substituted.
In subsection (3) (income by reference to which general business levy calculated)—
for “net premium income” there shall be substituted “ relevant net premium income ”, and
the words from “in respect of” to “relevant time” shall be omitted.
After that subsection there shall be inserted—
In subsection (4) (income by reference to which long term business levy calculated)—
for “net premium income” there shall be substituted “ relevant net premium income ”, and
the words from “in respect of” to “relevant time” shall be omitted.
After that subsection there shall be inserted—
After subsection (7) there shall be inserted—
After subsection (9) there shall be inserted—
In section 25(1) of the 1975 Act (application of surplus funds by the Board), for “authorised insurance companies carrying on business in the United Kingdom” there shall be substituted “ insurance companies to which this Act applies ”.
In Schedule 3 to that Act (additional provisions with respect to levies), in paragraph 4, for “authorised insurance company”, in each place, there shall be substituted “ insurance company to which this Act applies ”.
In that Schedule, at the end there shall be inserted—
Section 21 of the 1975 Act shall be amended as follows.
In subsection (3A), for paragraph (a) there shall be substituted—.
In subsection (3B)—
paragraph (a), and the word “and” at the end of that paragraph, shall be omitted, and
in paragraph (b), the words “other than the United Kingdom” shall be omitted.
In subsection (4A), for paragraph (a) there shall be substituted—.
In subsection (4B)—
paragraph (a), and the word “and” at the end of that paragraph, shall be omitted, and
in paragraph (b), the words “other than the United Kingdom” shall be omitted.
Section 21(7) of the 1975 Act (which provides for the deduction of reinsurance premiums in determining net premium income for the purposes of calculating amount payable under the general business levies) shall cease to have effect.
In paragraph 2(1) of Schedule 3 to that Act (which provides for general business levies in any financial year not to exceed specified percentage of company’s income), for “one per cent.” there shall be substituted “ 0.8 per cent. ”.
Schedule 3 to the 1975 Act (which makes provision as to the imposition and enforcement of general and long term business levies) shall be amended as follows.
After paragraph 6(2) there shall be inserted—
In paragraph 7, at the end of sub-paragraph (1) there shall be inserted “ , except where that income does not exceed such amount as the Secretary of State may specify for the purposes of this provision by regulations made by statutory instrument. ”
In Schedule 3 to the 1975 Act, in paragraph 7 (liability following notification of levy), in sub-paragraph (1), for “pay to the Board within one month of the date of the notice” there shall be substituted “ be liable to pay to the Board in accordance with sub-paragraph (1A) below ”, and after that sub-paragraph there shall be inserted—
In that Schedule, in paragraph 8 (service of notices), for “or 6” there shall be substituted “ , 6 or 7 ”.
Intermediaries
In Schedule 2 to the 1975 Act (levies on intermediaries), in paragraph 6 (liability following notification of levy), in sub-paragraph (1), for “pay to the Board within one month of the date of the notice” there shall be substituted “ be liable to pay to the Board in accordance with sub-paragraph (1A) below ”, and after that sub-paragraph there shall be inserted—
In that Schedule, in paragraph 7 (service of notices), for “or 5” there shall be substituted “ , 5 or 6 ”.
After section 23 of the 1975 Act there shall be inserted—
Miscellaneous other amendments of the 1975 Act
Section 1 of the 1975 Act (which makes provision for the financing of the Board’s expenditure in performing their functions) shall be amended as follows.
In subsection (4) (limit on amount outstanding in respect of principal of money borrowed by the Board), for “£10 million” there shall be substituted “ £40 million ”.
After that subsection there shall be inserted—
In section 11(5)(a) of the 1975 Act (powers of the Board in relation to the transfer of the long term business of a company in liquidation), after “another insurance company to which this Act applies” there shall be inserted “ or an authorised friendly society ”.
In section 16(3) of that Act (corresponding provision in relation to companies in financial difficulties), after “another insurance company to which this Act applies” there shall be inserted “ or an authorised friendly society ”.
Interpretation of the 1975 Act
In section 32 of the 1975 Act (interpretation), in subsection (2) (which provides that expressions used in that Act have the same meaning as in the Insurance Companies Act 1982), after “above,” there shall be inserted “ but subject to subsection (2ZA) below ”.
After that subsection there shall be inserted—
In section 32 of the 1975 Act (interpretation), after subsection (2ZA) there shall be inserted—
In section 31 of that Act (regulations), in subsection (1) (which provides for negative resolution procedure), after “any provision of this Act” there shall be inserted “ , except section 32(2C) below, ”.
In section 32 of the 1975 Act, in subsection (1), at the appropriate places in alphabetical order, there shall be inserted—.
In that section, after subsection (2C) there shall be inserted—
Friendly societies
In section 21 of the 1975 Act, at the end there shall be inserted—
Schedule 17 to the Friendly Societies Act 1992 (which prospectively amends the 1975 Act for the purpose of extending it to contracts of insurance with friendly societies) shall have effect subject to the amendments in Part I of Schedule 4 to this Act (which are consequential on the other provisions of this Act).
The 1975 Act, in its application to contracts of insurance with friendly societies entered into before the day on which section 2 above comes into force, shall have effect subject to the amendments in Part II of Schedule 4 to this Act (which have the effect that eligibility for protection in relation to such contracts is determined without regard to the amendments made by section 2 above).
In this section, “friendly society” has the same meaning as in the Friendly Societies Act 1992.
Supplementary
In this Act—“the Board” means the Policyholders Protection Board; and“the 1975 Act” means the Policyholders Protection Act 1975.
The enactments mentioned in Schedule 5 to this Act are hereby repealed to the extent specified in the third column of that Schedule.
This Act may be cited as the Policyholders Protection Act 1997.
The remaining provisions of this Act shall come into force on such day as the Treasury may by order made by statutory instrument appoint; and different days may be so appointed for different purposes.
An order under subsection (3) above may contain such transitional provisions and savings as the Treasury think fit.
This Act extends to Northern Ireland.
Section 1: consequential amendments
The 1975 Act shall be amended as follows.
In section 5(1) and (4), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In section 6(2), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In section 9(1), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In section 11(5), for “authorised insurance company”, in both places, there shall be substituted “ insurance company to which this Act applies ”.
In section 15(1), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
Section 16 shall be amended as follows.
In subsection (1), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In subsection (3), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In section 23(1), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In section 26(1), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In section 32, after subsection (1) there shall be inserted—
In Schedule 1, paragraph 1 shall be amended as follows.
In sub-paragraph (2), for “authorised insurance companies”, in both places, there shall be substituted “ insurance companies to which this Act applies ”.
In sub-paragraph (4), for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In sub-paragraph (5)—
for “authorised insurance companies” there shall be substituted “ insurance companies to which this Act applies ”, and
for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
Section 2: consequential amendments
The 1975 Act shall be amended as follows.
Section 6 shall be amended as follows.
In subsection (6), for “subsection (8)” there shall be substituted “ subsections (8) and (8A) ”.
In subsection (8)—
in paragraph (a), for “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”, and
in paragraph (b), for “United Kingdom policy at the beginning of the liquidation” there shall be substituted “ qualifying policy ”.
After that subsection there shall be inserted—
In subsection (9)—
for “were United Kingdom policies at any time” there shall be substituted “ are qualifying policies ”, and
in paragraph (a), for “United Kingdom policies at the time in question” there shall be substituted “ qualifying policies ”.
Section 8 shall be amended as follows.
In subsection (2)—
after “14” there shall be inserted “ and subsection (2A) ”, and
for the words “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”.
After that subsection there shall be inserted—
Section 9 shall be amended as follows.
In subsection (1), for “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”.
In subsection (2), for “was a United Kingdom policy at the beginning of the first-mentioned company’s liquidation” there shall be substituted “ is a qualifying policy ”.
Section 10 shall be amended as follows.
In subsection (2)—
after “14” there shall be inserted “ and subsection (2A) ”, and
for “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”.
After that subsection there shall be inserted—
Section 11 shall be amended as follows.
In subsection (3)—
after “14” there shall be inserted “ and subsection (3A) ”, and
for “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”.
After that subsection there shall be inserted—
Section 12 shall be amended as follows.
In subsection (1)—
at the beginning there shall be inserted “ Subject to subsection (1A) below, ”, and
for “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”.
After that subsection there shall be inserted—
Section 15 shall be amended as follows.
In subsection (2), for paragraphs (a) and (b) there shall be substituted
In subsection (3), after “may” there shall be inserted “ , in relation to the insurance of a protected risk or commitment ”.
Section 16 shall be amended as follows.
In subsection (2), after “arising” there shall be inserted “ in relation to matters by virtue of which they are such persons ”.
In subsection (9), for “was a United Kingdom policy at the relevant time” there shall be substituted “ is a qualifying policy and insures a protected risk or commitment ”.
In subsection (9A), for “United Kingdom policy at the relevant time” there shall be substituted “ qualifying policy ”.
Section 17 shall be amended as follows.
In subsection (4)—
at the beginning there shall be inserted “ Subject to subsection (4A) below, ”, and
for “was a United Kingdom policy at the relevant time as defined by section 16(6) above” there shall be substituted “ is a qualifying policy ”.
After that subsection there shall be inserted—
In section 32(1), after the definition of the expression “long term policy” there shall be inserted—.
Section 6: consequential amendments
The 1975 Act shall be amended as follows.
In section 1(2), after paragraph (a) there shall be inserted—.
In section 18(3)(a), for “or 16” there shall be substituted “ , 16 or 17A ”.
Section 28 shall be amended as follows.
In subsection (1)—
after paragraph (b) there shall be inserted, and
after “paragraph (b)” there shall be inserted “ or (c) ”.
In subsection (2), there shall be inserted at the end
In subsection (3), after “paragraph (b)” there shall be inserted “ or (c) ”.
Friendly societies: consequential amendments
Amendments of Schedule 17 to the Friendly Societies Act 1992
In paragraph 1(1), in the inserted section 1(2)(aa), for sub-paragraph (i) there shall be substituted—.
For paragraph 3 there shall be substituted—
Paragraph 6 shall be amended as follows.
In sub-paragraph (1), in the words inserted in subsection (1) of section 8 of the 1975 Act, for “authorised insurance company” there shall be substituted “ insurance company to which this Act applies ”.
In sub-paragraph (2), in the words inserted in subsection (4) of that section, for “authorised insurance companies” there shall be substituted “ insurance companies which are not friendly societies ”.
In paragraph 7, the inserted section 8A shall be amended as follows.
The existing provision shall become subsection (1) and, in that subsection—
after “14” there shall be inserted “ and subsection (2) ”, and
for “was a United Kingdom policy at the beginning of the liquidation” there shall be substituted “ is a qualifying policy ”.
After that subsection there shall be inserted—.
In paragraph 9—
for “subsection (3)” there shall be substituted “ subsection (3A) ”,
the subsection inserted in section 11 of the 1975 Act shall be renumbered “(3B)” and, in that subsection, for paragraph (b) there shall be substituted—, and
at the end there shall be inserted “ and in subsection (5)(a) for “another” there shall be substituted “an”.
In paragraph 11, in the subsection inserted in section 16 of the 1975 Act, after paragraph (a) there shall be inserted—.
For paragraph 16 there shall be substituted—
Paragraph 18 shall be amended as follows.
For sub-paragraph (3) there shall be substituted—
In sub-paragraph (4)—
for “subsection (2)” there shall be substituted “ subsection (2ZA) ”, and
the subsections inserted in section 32 of the 1975 Act shall be renumbered “ (2ZB) ” and “ (2ZC) ” respectively.
After that sub-paragraph there shall be inserted—
Application of the 1975 Act to existing contracts
For section 4 there shall be substituted—
In section 8A—
in subsection (1)—
the words “and subsection (2)” shall be omitted, and
for “is a qualifying policy” there shall be substituted “ was a United Kingdom policy at the beginning of the liquidation ”, and
subsection (2) shall be omitted.
In section 10—
in subsection (2)—
the words “and subsection (2A)” shall be omitted, and
for “is a qualifying policy” there shall be substituted “ was a United Kingdom policy at the beginning of the liquidation ”, and
subsection (2A) shall be omitted.
In section 11—
in subsection (3)—
the words “and subsection (3A)” shall be omitted, and
for “is a qualifying policy” there shall be substituted “ was a United Kingdom policy at the beginning of the liquidation ”, and
subsection (3A) shall be omitted.
In section 12—
in subsection (1)—
the words “Subject to subsection (1A) below,” shall be omitted, and
for “is a qualifying policy” there shall be substituted “ was a United Kingdom policy at the beginning of the liquidation ”, and
subsection (1A) shall be omitted.
In section 15—
in subsection (2), for the words from “if” to the end there shall be substituted—, and
in subsection (3), the words “, in relation to the insurance of a protected risk or commitment” shall be omitted.
In section 16—
in subsection (6), after “In this subsection” there shall be inserted “ and in the following provisions of this section ”, and
in subsection (9), for “is a qualifying policy and insures a protected risk or commitment” there shall be substituted “ was a United Kingdom policy at the relevant time ”.
In section 17—
in subsection (4)—
the words “Subject to subsection (4A) below,” shall be omitted, and
for “is a qualifying policy” there shall be substituted “ was a United Kingdom policy at the relevant time as defined by section 16(6) above ”, and
subsection (4A) shall be omitted.
In section 21, subsection (9A) shall be omitted.
In section 32(1), at the end there shall be inserted “ and references to United Kingdom policies shall be construed in accordance with section 4 above ”.
Repeals