FSCS Car Insurance Protection UK 2026: What If Your Insurer Fails?

The Financial Services Compensation Scheme (FSCS) is the UK's statutory fund of last resort for customers of FCA-authorised financial services firms that have failed and are unable to meet their obligations. It was established under the Financial Services and Markets Act 2000 (FSMA 2000) and is administered by the FSCS as an independent body operating under rules set by the FCA (in the Compensation sourcebook, COMP, in the FCA Handbook). The FSCS covers most classes of insurance written by FCA-authorised insurers, including motor insurance.

For the approximately 33.3 million motor insurance policyholders in Great Britain (DfT VEH0101 Q3 2025), the FSCS provides a backstop protection against the risk that their FCA-authorised insurer becomes insolvent - a risk that, while rare, does occur in the UK insurance market. Understanding what the FSCS covers, at what level, and who is eligible is relevant consumer protection knowledge for every driver. For complaints against a solvent insurer (where the insurer is still trading), the FOS is the correct route - see our FOS guide. For the full market overview, visit the car insurance hub.

What FSCS covers for motor insurance - the protection levels

The level of FSCS protection for insurance claims depends on whether the claim arises from compulsory insurance (required by law) or voluntary insurance (taken by choice above the legal minimum). The distinction is important for motor insurance because a comprehensive policy contains both elements:

Who is eligible for FSCS protection?

FSCS eligibility for insurance claims is set out in the FSCS Compensation sourcebook (COMP 4) in the FCA Handbook. For motor insurance, the key eligibility criteria are:

UK insurer failure - what has happened in practice

FCA-authorised UK motor insurer insolvencies are rare but have occurred. The most notable example with direct FSCS implications for UK motor policyholders in recent years was Gable Insurance AG, a Liechtenstein-based insurer that operated in the UK under EEA passporting rights. When Gable failed in 2016, FSCS coverage was limited because Gable was not a full FCA-authorised firm - its home-state compensation scheme applied. This case highlighted the importance of checking whether a motor insurer is directly FCA-authorised rather than relying on EEA passporting.

The Prudential Regulation Authority (PRA), which supervises the financial soundness of UK-authorised insurers jointly with the FCA, published Solvency II and now the UK Solvency regime requirements that mandate minimum capital standards for UK motor insurers. These capital requirements - enforced by the PRA using Bank of England data and published solvency filings - are intended to reduce the probability of insurer failure. However, they do not eliminate the risk entirely, which is why FSCS protection exists as a backstop.

A separate but notable situation was the failure of Quinn Insurance Limited in 2010. Quinn was Irish-regulated and its UK operations were conducted under EU passporting rights. When Quinn failed, UK policyholders were initially protected through a combination of the Irish MIBI (Motor Insurers' Bureau of Ireland) and a temporary arrangement brokered by the UK government and FCA to ensure continuity of cover for Quinn's UK policyholders. This was not an FSCS situation - FSCS did not apply to Quinn - but it illustrates the risk profile for policyholders with EEA-passporting insurers.

Post-Brexit (from 1 January 2021), EEA insurers can no longer passport into the UK. Any EEA insurer wishing to write UK risks must be separately FCA-authorised or operate through a UK subsidiary. This change has increased the proportion of the UK motor insurance market covered by FCA authorisation and therefore by FSCS protection.

How to make an FSCS claim for motor insurance

When an FCA-authorised insurer fails, the FSCS typically takes over the management of eligible claims. The process is as follows:

Step 1 - Declaration of insolvency. A court declares the insurer insolvent and appoints a liquidator. The FSCS is informed and assesses whether the insurer is a covered person under COMP 6 of the FCA Handbook.

Step 2 - FSCS announcement. The FSCS publishes information about the failure on its website (fscs.org.uk) and contacts known policyholders where possible. Policyholders should check fscs.org.uk and their insurer's name against the FSCS published list of failed firms.

Step 3 - Submitting a claim. Eligible claimants apply to the FSCS online at fscs.org.uk or by telephone. For motor insurance claims, the claim form requires policy details, the outstanding claim amount, and supporting evidence.

Step 4 - FSCS assessment and payment. The FSCS assesses eligibility and calculates the compensation payable (100% of valid claims for compulsory insurance; 90% for non-compulsory elements). Payment timelines vary by case complexity but the FSCS publishes target timelines for each declared failure on its website.

Frequently Asked Questions

What does the FSCS protect for motor insurance?

The FSCS protects eligible policyholders if their FCA-authorised motor insurer becomes insolvent. For compulsory third-party motor insurance (required by the Road Traffic Act 1988), the FSCS provides 100% protection with no upper monetary limit. For non-compulsory elements - own damage, fire, theft and comprehensive cover beyond the legal minimum - the FSCS provides 90% protection with no upper monetary limit. Premium refunds for unused premium are also covered at 90%.

Does FSCS apply to all UK car insurers?

FSCS applies to FCA-authorised UK insurers. Before Brexit (31 December 2020), EEA insurers passporting into the UK were not subject to FCA authorisation and therefore not covered by the FSCS - their home-state compensation schemes applied instead. Since Brexit, EEA insurers must be separately FCA-authorised to write UK risks, increasing FSCS coverage across the market. Always verify on the FCA Register at register.fca.org.uk that your insurer is directly FCA-authorised rather than relying on passporting.

What happens to my policy if my insurer fails?

If your FCA-authorised insurer is declared insolvent, the FSCS typically steps in to handle eligible claims. The FSCS may either pay claims directly or arrange for another insurer to take over existing policies (a portfolio transfer). During the period of FSCS administration, policyholders are generally able to continue making valid claims. The FSCS will communicate directly with affected policyholders and publish information at fscs.org.uk. It is sensible to obtain new insurance from a solvent insurer as soon as possible to ensure continuous coverage.

How do I check if my insurer is FSCS-protected?

Verify that your insurer is directly FCA-authorised by searching the FCA Register at register.fca.org.uk. Look for the firm's name and check that its authorisation status shows as authorised (not cancelled, withdrawn or operating under EEA temporary permission). FCA-authorised UK insurers are automatically covered by the FSCS for eligible claims. The FSCS website at fscs.org.uk also has a checker tool for confirming FSCS coverage for specific firms.

Sources

• FSCS Compensation sourcebook COMP - handbook.fca.org.uk/handbook/COMP - current
• COMP 10.2.3R (insurance protection levels) - handbook.fca.org.uk/handbook/COMP/10/2.html
• Financial Services and Markets Act 2000 Part XV - legislation.gov.uk/ukpga/2000/8
• FSCS website - fscs.org.uk - current protection levels and claim information
• FCA Financial Services Register - register.fca.org.uk - insurer authorisation verification
• Bank of England / PRA solvency supervision - bankofengland.co.uk/prudential-regulation - insurer capital requirements
• Road Traffic Act 1988 (compulsory insurance context) - legislation.gov.uk/ukpga/1988/52
• DfT Vehicle Licensing Statistics VEH0101 Q3 2025 - gov.uk/government/statistics/vehicle-licensing-statistics