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Competent guarantee funds in the event of insurance undertakings failure

In the event of the failure of an insurance company, different guarantee funds may cover policyholders, underwriters, members and beneficiaries depending on the nature of the risks covered. Compensation by a guarantee fund shall take place under certain conditions and, where appropriate, within the limits laid down in the regulations.

Depending on the terms of the applicable regulation, some funds operate in the event of the “failure” of the insurance company, while others intervene in the event of the withdrawal of its authorisation.

An undertaking is generally considered to fail when it has become insolvent and is subject to receivership or judicial winding-up procedures. When it comes to insurance undertakings, failure is closely related to the withdrawal of their authorisation(1), therefore the conditions governing the intervention of the different funds are often similar.

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(1) The withdrawal of an insurance undertaking's authorisation entails its liquidation (Article L. 326-1 of the French Insurance Code). In addition, the cessation of payments of an insurance undertaking is a situation which can justify the withdrawal of its authorisation (Article L. 325-1 of the French Insurance Code).

Guarantee Fund and European Passport - Executive Summary

 

Incoming
(EU/EEA undertakings operating in France under FoS/FE)

Outgoing
(French undertakings operating in the EU/EEA under FoS/FE)

FGAO

Yes

Motor Liability and Contractors Professional Liability only

No
FGAPDS

Yes

Medical Liability

No

FGAP

NoYes

FGFIP

NoYes

FGMU

No

Yes

Subject to the actual creation of the fund

 

Guarantee fund for the insured against the default of life and health insurance companies (FGAP)

General information

 

The FGAP is mobilised, under certain conditions provided for in the French Insurance Code, in the event of the failure of life and health insurance companies authorised in France under the French Insurance Code (Articles L. 423-1 to L 423-8 of the French Insurance Code). It ensures the compensation of policyholders, underwriters, members and beneficiaries who have subscribed insurance contracts hedging the following risks: Accidents (class 1), Sickness (class 2), Life-death, capitalisation (and all transactions falling within classes 20 to 26).

 

The decision to resort to the FGAP in the event of the failure of an insurance company falls within the competence of the ACPR, after written consultation of the fund.

 

Where possible, the claim for compensation shall be addressed to the FGAP by the liquidator. The amount of compensation guaranteed by the fund shall be calculated for each policyholder, underwriter, member or beneficiary for all insurance contracts related to the defaulting company, up to EUR 70,000. This cap will be increased up to EUR 90,000 for disability or invalidity annuities and the death benefits resulting from life insurance policies (Article R. 423-7 of the French Insurance Code).

 

FGAP and European passport

 

The FGAP is not mobilised in the event of the failure of “incoming” insurance companies operating in France under the freedom to provide services or the freedom of establishment (FoS/FE), but the regulation does not exclude the coverage of companies authorised in France, exercising under FoS/FE within the European Union or of the European Economic Area (“outgoing”).

 

 

For more information, including the fund's mobilisation conditions, see the FGAP website: http://www.fgap.fr/

Guarantee fund for compulsory damage insurance (FGAO)

General information

 

The FGAO is responsible, under certain conditions laid down in the French Insurance Code, for protecting policyholders, underwriters, members or beneficiaries of insurance contracts the subscription of which is compulsory under a legislative or regulatory provision, against the consequences of the withdrawal of authorisation of insurance companies subject to the French Insurance Code (Article L. 421-9 of the French Insurance Code). The FGAO may also be mobilised in respect of motor liability insurance (referred to in Article L. 211-1 of the French Insurance Code) and contract works insurance (referred to in Article L. 242-1 of the same Code).

 

The decision to resort to the FGAO in the case of the withdrawal of an insurance company's authorisation falls within the competence of the ACPR, after written consultation of the fund.

 

It should be noted that “are covered by the guarantee fund only insurance claims guaranteed by a contract for which the harmful event causing liability occurs during the contract period and at the latest at midday on the fortieth day following the decision of withdrawal of the insurer's authorisation, event which gives rise to a declaration by the insured person or to a first claim by a third party victim less than five years after this date and which occurred in France, or, for accidents that occurred in the territory of a State referred to in Article L. 211-4 other than France, is caused by the use of vehicles and their trailers and semi-trailers which are normally based in France" (Article L. 421 -9 I, paragraph 2 of the French Insurance Code)."

 

 

FGAO and European passport

 

Since 1 July 2018, the FGAO is only mobilised in the event of the withdrawal of an insurance undertaking operating in the French territory.

 

Therefore, the FGAO may be mobilised in the event of the withdrawal of authorisation of an “incoming” insurance undertaking operating in France under FoS/FE in the motor liability or damage to contract works insurance sector. In this respect, undertakings operating in France under FoS/FE in these sectors shall join this fund1.

 

On the other hand, the FGAO cannot cover the activities of “outgoing” French insurance companies in the motor liability or contract works insurance sector in the European Union or the European Economic Area under the conditions of the FoS/FE, where their authorisation is withdrawn.

 

For more information, including the fund's mobilisation conditions, see the FGAO website: https://www.fondsdegarantie.fr/

 

(1)For contracts subscribed or renewed from 1 July 2018 on

Guarantee fund for damages resulting from acts of prevention, diagnosis or care provided by health professionals (FGAPDS)

General information

 

As of 1 July 2018, the FGAPDS is entitled to compensate, under certain conditions provided for by the French Insurance Code, the beneficiaries of contracts subscribed by health professionals acting on an independent basis in the event of the withdrawal of authorisation of an insurance company operating in the medical liability insurance sector under Article L. 426-1 II of the French Insurance Code.

 

The FGAPDS only covers “claims incurred in France, relating to damage of particular gravity provided for in II of Article L. 1142-1 of the French Code of Public Health and guaranteed by the contract, the harmful event of which occurs during the period of validity of the contract or before that period and at the latest by midday on the fortieth day following the decision to withdraw the insurer's authorisation, the claim of which is made within the time limits set out in Article L. 251-2 within 10 years after the fortieth day following the decision to withdraw the authorisation. Insurance contracts mentioned in paragraphs 1 to 4  of Article L. 421-9 shall be excluded from any compensation."

 

 

FGAPDS and European passport

 

The FGAPDS may be mobilised in the event of the withdrawal of the authorisation of “incoming” insurance undertakings operating in France. Therefore, insurance undertakings operating under FoS/FE in France in the medical liability sector can benefit from the protection of the FGAPDS. In this respect, undertakings operating under FoS/FE in France and in this sector must join this fund.

 

On the other hand, in the event of a withdrawal of authorisation, the FGAPDS cannot cover the activities of French insurance undertakings operating in the medical liability sector as “outgoing” undertakings under FoS/FE in the European Union or the European Economic Area .

 

 

For more information, see the website of the Central Reinsurance Fund: https://www.ccr.fr/fonds-publics

Joint guarantee fund for provident institutions (FPGIP)

General information

 

In the event of the failure of provident institutions and their unions governed by the French Social Security Code carrying out insurance operations, the FPGIP may intervene to cover the benefit entitlements of participating members and beneficiaries of their operations. The conditions and arrangements for intervention of the FPGIP are provided for in the fund Regulation (Article L. 931-38 of the French Social Security Code and Article 5 of the FPGIP Regulation).

 

The decision to resort to the FPGIP in the event of the failure of a provident institution or union falls within the competence of the ACPR, after written consultation of the fund.

 

Where possible, the claim for compensation shall be submitted to the FPGIP by the liquidator. The amount of compensation guaranteed by the fund shall be calculated for each participant, underwriter, member or beneficiary for all the membership bulletins or contracts relating to it and taken with the failing provident institution or union, up to EUR 70,000. This cap shall be increased up to EUR 90,000 for disability or invalidity annuities, annuities for unfitness to drive, annuities covering the risk of dependency and annuities resulting from membership bulletins or contracts in the event of death or in case of life (Article 6 of the FPGIP Regulation).

 

 

For more information, including the fund's conditions of mobilisation, see the FPGIP website: https://www.fpgip.org/

 

 

FPGIP and European passport

 

The FPGIP is not intended to intervene in the event of a failure of incoming European insurance undertakings operating in France under FoS/FE.

 

However, the regulation does not exclude the intervention of the fund for activities undertaken in the European Union or the European Economic Area by provident institutions authorised in France or their unions.

Guarantee fund for policyholders against the default of mutual insurance companies and their unions carrying out insurance operations (FGMU)

General information

 

Articles L. 431-1 et.seq. of the French Insurance Code create the operating framework for a guarantee fund intended to intervene in the event of the failure of a mutual insurance company or its unions, in order to preserve the rights of their participating and honorary members, their beneficial owners and the beneficiaries of their services.

 

However, the establishment of this fund is subject to the implementation of statutes and rules of procedure which, to date, do not exist yet.

Mis à jour le : 09/07/2020 11:08