Policyholders Protection Act 1975

11 Special provision for future benefits under long term policies

(1) Subject to subsection (2) below, in this section " future benefit", in relation to any long term policy of a company in liquidation, means any benefit provided for under the policy which has not fallen due to be paid by the company before the beginning of the liquidation.

(2) Any bonus provided for under a policy shall not by virtue of subsection (1) above be treated as a future benefit within the meaning of this section unless it was declared before the beginning of the liquidation.

(3) Subject to sections 13 and 14 below and to the following provisions of this section, it shall be the duty of the Board, as soon as reasonably practicable after the beginning of the liquidation, to make arrangements in pursuance of subsection (5) below for securing continuity of insurance for every policyholder of a company in liquidation who is a policyholder in respect of a long term policy which was a United Kingdom policy at the beginning of the liquidation.

(4) Subject to subsection (6) below, the duty of the Board under subsection (3) above to secure continuity of insurance for any policyholder extends only to securing that the policyholder will receive ninety per cent, of any future benefit under his policy, subject to and in accordance with terms corresponding so far as appears to the Board to be reasonable in the circumstances to the terms which would have applied under the policy.

(5) For the purpose of securing continuity of insurance for any policyholders of a company in liquidation in accordance with subsection (3) above, the Board may take such measures as appear to them to be appropriate—

(a) for securing or facilitating the transfer of the long term business of the company, or of any part of that business, to another authorised insurance company; or

(b) for securing the issue by another authorised insurance company to the policyholders in question of policies in substitution for their existing policies.

(6) Where a long term policy of a company in liquidation contains terms relating to matters other than future benefits under the policy the duty of the Board under subsection (3) above to secure continuity of insurance for the policyholder in question extends also to securing that the policy after any transfer of business in which it is included or (as the case may be) any policy issued in substitution for the policy in question contains terms relating to those matters which correspond so far as appears to the Board to be reasonable in the circumstances to the terms first mentioned above.

(7) During any period while the Board are seeking to make arrangements for securing continuity of insurance for any policyholders of a company in liquidation in accordance with subsection (3) above, it shall be the duty of the Board, subject to sections 13 and 14 and subsection (11) below, to secure that ninety per cent, of any future benefit under a long term policy which would have fallen due to be paid to any of those policyholders during that period is paid to the policyholder in question as soon as reasonably practicable after the time when the benefit in question would have fallen due under the policy (but subject to and in accordance with any other terms which would have applied under the policy).

(8) Arrangements made by the Board in pursuance of subsection (5) above shall not be required to cover any future benefit under a policy in so far as any sums have been paid to the policyholder in pursuance of subsection (7) above by reference to that benefit.

(9) Where it appears to the Board that it is not reasonably practicable to secure continuity of insurance for any policyholder of a company in liquidation in accordance with subsection (3) above, it shall be the duty of the Board, subject to sections 13 and 14 and subsection (10) below, to pay to the policyholder a sum equal to ninety per cent, of the value attributed to his policy for the purposes of any claim in respect of his policy in the winding up of the company, as soon as reasonably practicable after any such claim is admitted.

(10) The Secretary of State may by regulations made by statutory instrument—

(a) require the Board, in a case to which subsection (9) above applies, to pay to the policyholder at his option, instead of the sum there mentioned, a sum equal to ninety per cent, of the value of the future benefits under his policy, or of such of those benefits as may be specified by the regulations, determined in such manner as the regulations may provide ;

(b) make such provision as appears to him to be appropriate with respect to the time within which and the manner in which the Board are to perform any of their functions under this section (including any function conferred on them by virtue of paragraph (a) above).

(11) Any duty of the Board under subsection (3) or (7) above to take any measures for assisting a policyholder of a company in liquidation shall be subject to compliance on his part with any conditions imposed by the Board with respect to the payment, in any case or in any class or description of case, of sums which would have fallen due from policyholders of a company in liquidation by way of premiums under long term policies if the company had not gone into liquidation.