By Huw Jones
LONDON, June 25 (Reuters) - Britain's financial services
compensation body is "keeping an eye" on insurers facing claims
from companies whose business has been interrupted by the
COVID-19 pandemic, its chief executive told Reuters.
Some insurers have balked at paying out on business
interruption claims, and the Financial Conduct Authority (FCA)
is asking the courts to clarify the wording in policies, which
could lead to more claims being valid.
The FCA's Financial Services Compensation Scheme (FSCS) is
braced for a rise in claims as some financial firms are expected
to go under in the pandemic.
The FSCS is working with the FCA, Bank of England and
finance ministry to quantify what could come down the line, said
FSCS Chief Executive Caroline Rainbird, a banking industry
veteran who took up the reins last year.
"We will look at scenarios, work with regulators and do
desk-top exercises to make sure we are prepared," Rainbird said.
Credit unions and smaller financial advisers "could be an
issue", along with more complex pension vehicles, she said. "We
are keeping an eye on the insurance sector," she added.
Rainbird said the body could if needs be raise additional
levies through the financial year. An FSCS running out of money
would harm public confidence in financial services, she added.
FCA Chair Charles Randell said last week that the FSCS's
levy on firms used to pay for compensation claims - which he
said was already unacceptably high - is likely to increase due
to COVID.
The FSCS had already bumped up its levy by 44 million pounds
to 649 million for the 2020/21 financial year to meet claims
from 11,600 investors caught in the collapse last year of London
Capital & Finance investment firm.
It has compensated just 159 investors who had switched from
shares to holding "mini-bonds" sold by the now defunct LCF.
This narrow base for compensation is being challenged in the
courts, but in the meantime the FSCS is set to start paying out
on claims from LCF investors who were mis-advised.
The FSCS will give a further update on LCF claims on Friday.
(Reporting by Huw Jones; Editing by Jan Harvey)
