The total amount that general insurance (GI) distributors will be required to pay to the Financial Services Compensation Scheme (FSCS) will increase to £1.2m in 2025/26.
This is up from £0.8m in 2024/25 as revealed by the FSCS in their latest management expenses budget.
Its Budget Update which outlines proposed management expenses for 2025/26, says that to ensure it has the funding to meet its running costs and carry out its core functions the FSCS anticipates requiring an annual operating budget of £103.6m.
The total levy for 2025/26, which includes both FSCS’s management expenses and estimated compensation payments, remains as forecast in November’s Outlook.
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are consulting on an overall 2025/26 Management Expenses Levy Limit of £108.6m.
This includes a core budget of £103.6m and an unlevied reserve or continency fund of £5m.
This reserve is unchanged from the contingency fund in 2024/25.
While the FCSC revealed management expenses forecast for 2024/25 sits currently within the budget of £103.1m, it added it has made some savings, with lower claims-processing costs than previously anticipated.
It said any budget surpluses will be used to offset the levy for the relevant classes in 2025/26.
Martyn Beauchamp, interim CEO of FSCS, (pictured) said: “We have continued to ensure we absorb as many inflationary rises as possible, keeping our expected management expenses in line with the current financial year.
“We have invested in staff to enhance our team of experts and strengthen our internal capabilities.
“We are funding this investment in expertise with savings from reductions in outsourced claims-handling costs and professional fees.
“Next year we come to the end of our three-year plan to build our in-house claims-handling capability.
“This major change to our operating model has given us greater control and flexibility to handle the variety of claims we receive each day.
“This transition is progressing well, continuity of service has been maintained, and we are on schedule to be fully embedded in the 2025/26 financial year.”
