Despite being called the Third Parties (Rights Against Insurers) Act 2010 (the Act), the Act, which allows a claimant to stand in the defendant insured's position in relation to a claim on its liability insurance, is not yet in force nearly six years later.

Once it is in force, it will allow a claimant to issue proceedings directly against the insurers of an insolvent defendant instead of having to restore the defendant company to the register first, which is the procedure under the existing 1930 legislation. It will also provide for earlier disclosure of insurance arrangements, including whether the policy would respond, without the need to issue court proceedings. The third party claimant will also be able to notify the insolvent defendant's insurers directly of its insurance claim, to assist with late notification hurdles.

The Act has been held back because it did not fully address certain insolvency situations. Enabling provisions to correct this were included in the Insurance Act 2015, and on 25 February 2016 draft regulations were laid before Parliament - called the Third Parties (Rights Against Insurers) Regulations 2016 (the Regulations).

In summary, the main purpose of the Regulations is to amend the Act to provide further circumstances and categories (including certain insolvency, administration or dissolution situations) by which a corporate or unincorporated body falls under the Act.

Once the Regulations have been passed, all that is needed is for Parliament to set a commencement date for the Act to come into force, most likely this Summer 2016.

The Act signals major change from the current regime and insurers will need to remind themselves what it involves given the years that have passed since the Act was given Royal Assent. We will be reporting in detail on what the changes will signify for insurers, and what outcomes and tactics they will need to consider, once a commencement date becomes clearer.

The draft Regulations can be found here.