Chester Street Insurance Holdings

HC Deb 10 May 2001 vol 368 cc284-5W

Mr. Worthington

To ask the Chancellor of the Exchequer if he will make a statement on compensation for asbestosis sufferers and their families following the insolvency of the insurance company Chester Street. [161061]

Mr. Andrew Smith

Following the insolvency of Chester Street on 9 January this year, concerns were raised over the position of employees whose private sector employer insured with Chester Street and no longer exists or is insolvent, and whose injury was sustained during employment in the private sector before 1972 (1975 in Northern Ireland). There were fears that these individuals would not receive the compensation for which their employers would have been liable.

However, the insurance industry will fund compensation to those individuals in the following circumstances.

The Policyholder's Protection Board (PPB) will make payment in accordance with their statutory powers (90 per cent. of awards in respect of pre-1972 (1975 in NI) liabilities) if the compensation award was settled prior to Chester Street's insolvency on 9 January 2001.If the award was settled on or after 9 January, the insurance industry will fund equivalent payments pending the implementation of the new industry funded Financial Services Compensation Scheme (FSCS), planned to come into effect no later than November this year. The Financial Services Authority (FSA) have been asked to explore rules to cover employee third party rights in employer liability cases to ensure that in cases where both the employer and the insurer are insolvent, victims receive compensation.

The Government will themselves fund the compensation owed to former employees of public sector companies for whom they are liable.

These arrangements apply only when the employer no longer exists or is insolvent. Where the employer still exists, or its liabilities have been carried forward to another company, that company or firm are liable to pay the compensation award.

The PPB will ensure that claims are topped up to 100 per cent. so far as they relate to compulsory insurance policies (i.e. relate to the period from 1972 (1975 in Northern Ireland)). Both private sector employers and, where that employer no longer exists, the employees, are eligible for that payment.