Guarantee funds in France
France has set up two specific funds to handle the bankruptcy of both non-life and life insurers, the Guarantee Fund for Mandatory Insurance (FGAO) and the Guarantee Fund for Life Insurance (FGAP).
The Guarantee Fund for Mandatory non-life Insurance (FGAO)
The Guarantee Fund for Mandatory Non-life Insurance (FGAO), formerly known as the Motor Guarantee Fund (FGA), is an entity tasked with compensating, in the name of national solidarity, the victims of traffic accidents when the insurer is bankrupt.
Set up in 1951, the tasks of the FGAO have expanded over time. The fund is also tasked with assisting policyholders in the event of the failure of national or European insurance companies, providing compensation to injured policyholders who have underwritten a motor liability or damage insurance policy.
This public service instrument for assisting victims is financed largely by contributions and fees levied on private individuals' property insurance policies and by contributions from insurance companies. It does not receive any budgetary allocation from the State.
To date, the fund has intervened in the bankruptcy of the companies: Alfa, Qudos, Gable, CBL and Elite, licensed in Denmark (for the first two), Liechtenstein, Ireland and Gibraltar respectively.
The Guarantee Fund for Life Insurance (FGAP)
In addition to the FGAO, which is tasked with offsetting failures of defaulting property and casualty insurers, a Guarantee Fund for Life Insurance (FGAP) was set up in 1999. The purpose of this fund is to strengthen the protection of policyholders in the event of the failure of a life insurance company.
When a life insurer is in difficulty, the French Prudential Supervision and Resolution Authority (ACPR) places it under supervision and imposes appropriate measures to redress its financial situation.
If, despite the recovery measures, the life insurance company fails to honor its commitments, the ACPR may then refer the matter to the Guarantee Fund to protect policyholders in such circumstances.
The FGAP has never had to come into play except once when it was called upon, in 2000, following the liquidation of ICD Vie. On that occasion, it did not have to compensate clients because all policies were transferred to another insurer.
