Insurance sector slapped with a 70 per cent top-up levy from regulators
UK regulators have hiked levies on the insurers and pension firms despite plans to reduce total levies on the Britain's financial sector next year.
The Financial Services Compensation Scheme (FSCS), a statutory initiative to compensate customers of financial services that are unable to pay claims against them, announced its overall budget for 2017/18.
The overall industry levy will fall from £401m in 2016/17 to £378m in 2017/18.
But alongside the budgetary announcement was a series of "supplementary" levies required to top-up the budget for the remainder of the FSCS financial year.
Read more: FSCS is planning to levy £363m in the next financial year
General insurance pays the price
General insurers have been slapped with a supplementary levy of £63m in 2016/17, life and pensions intermediaries an additional £36m and home finance intermediation firms a further £15m.
The additional general insurance levy is to fund compensation for policyholders of Enterprise and Gable insurance firms and is a near 70 per cent increase on the previous expected levy of £91m.
Life and pensions intermediaries will not have to fund the full additional costs which the FSCS said were due to a "high numbers of SIPP-related claims we are continuing to receive".
Levies on the life and pensions are capped at £100m. As it already pays over £90m, the additional £26m will – for the first time – be sought from the wider "retail pool". General insurance, the sector that funds the most of this money, will have to pay a further £8.2m.
| 2016/17 Final Levy | 2016/17 Levy (£m) | Supplementary Levy (£m) |
| Deposits | 24 |
|
| General Insurance Provision | 91 | 63 |
| General Insurance Intermediation | 8 |
|
| Life & Pensions Provision |
|
|
| Life & Pensions Intermediation* | 90 | 10 |
| Investment Provision | 2 |
|
| Investment Intermediation | 94 |
|
| Home Finance Intermediation | 6 | 15 |
| Base costs | 22 |
|
|
Total |
337 | 88 |
There was, however, good news for general insurers in the years to come.
"The levy for general insurers is expected to be significantly lower, but for the life and pension intermediation sector we forecast materially higher costs and a second call on all firms to contribute to these claims."
And investment intermediate levies in 2017/18 would go the other way, rising although the sector received a refund of £50m in 2016/17.
Read more: Watchdog looks for feedback on how best to protect consumers' cash
FSCS chief exec Mark Neale added:
We recognise the costs impact on firms, particularly in the light of the supplementary levies announced today, of which we seek to give as much advance warning as possible.
That's why we're concentrating on reducing our overheads and constantly seeking value for money in our work.
Who pays for pensions?
|
2016/17 Retail Pool Levy |
(£m) |
|
General Insurance Intermediation |
8.2 |
|
Life and Pensions Intermediation |
At limit |
|
Investment Intermediation |
4.1 |
|
Home Finance Intermediation |
1.1 |
|
Investment Provision |
5.4 |
|
Insurers – General |
1.0 |
|
Insurers – Life |
1.9 |
|
Home Finance Providers |
1.2 |
|
Total |
26.0 |