The Financial Services Compensation Scheme (FSCS) has published its 2025/26 Annual Report and Class Statements, highlighting several developments, some that are relevant to insurance brokers and intermediaries.

1. Deposit Protection Limit Increased to £120,000

From 1 December 2025, the FSCS deposit protection limit increased from £85,000 to £120,000 per eligible depositor, per authorised institution. Protection for temporary high balances also increased from £1 million to £1.4 million for qualifying circumstances. FSCS has also introduced a refreshed FSCS Protected badge to improve consumer awareness.

2. New Bank Resolution Framework

The Bank Resolution (Recapitalisation) Act 2025 came into force in July 2025. The legislation expands FSCS’s role in supporting the recapitalisation of failing banks and building societies and introduces a new levy class (A2) to recover recapitalisation costs from relevant firms. No transactions occurred under the new class during 2025/26.

3. General Insurance Distribution

During 2025/26, there were no new firm failures, with approximately £0.7m paid to customers for legacy firm failures.  As previously reported, no levies were raised for the General Distribution class in 2025/26, as surpluses carried over from prior years were sufficient to meet the class’s funding needs for the year.

4. Premier Insurance Company Ltd failure

Premier Insurance Company Ltd was declared in default in October 2025. FSCS worked with regulators and insolvency practitioners to protect approximately 18,000 customers, including almost 3,000 indemnity claims and more than 4,000 premium refunds. Compensation relating to Premier totalled approximately £2 million during the financial year. Brokers are reminded to review insurer due diligence and financial resilience monitoring arrangements, and ensure contingency plans are in place for insurer insolvency events and customer communications through business continuity planning.

5. General Insurance Provision

FSCS paid £100 million in compensation within the General Insurance Provision class during 2025/26. Although lower than the previous year’s £134 million, compensation remains substantial, primarily relating to historic insurer failures. Levy income for the class totalled £85 million.

The major compensation costs related to previously failed insurers including:

• Chester Street Holdings Ltd
• BAI Ltd
• Green Realisations 123 Ltd (formerly MCE Insurance Company Ltd)
• East West Insurance Company Ltd
• Gefion Insurance A/S
• Prometheus Insurance Company Ltd.

6. FSCS Levy Outlook

An annual levy of £356 million was raised from firms in 2025/26, with no supplementary levy or retail pool required. The largest funding classes were:

• Life Distribution & Investment Intermediation – £120 million
• Investment Provision – £87 million
• General Insurance Provision – £85 million.

FSCS recovered more than £34 million from failed firm estates during the year, helping reduce the overall levy burden on firms. Recoveries over the last three years total approximately £145 million.

6. Consumer trust and awareness

The FSCS Chief Executive, Martin Beauchamp, reports that 85% of consumers who are aware of FSCS say its protection increases their trust in financial services. The scheme continues to emphasise consumer awareness as a key contributor to confidence in the sector.   Members may wish to consider how clear explanations of FSCS protection can support client confidence and incorporate updated FSCS messaging into customer communications where appropriate.

BIBA members’ compliance and regulatory queries should be directed to [email protected],  quoting their membership number.

 

 

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