The AITC is working with Aifa in a bid to ease the plight of IFAs struggling to get professional indemnity insurance because of their potential exposure to split-caps.
The AITC is concerned that IFAs will be forced to stop writing investment trust business because PI insurers are indiscriminately raising premiums to reflect their fears of legal action from investors who have lost money through split caps.
It has joined with Aifa to investigate whether IFAs will be able to reinsure themselves with their existing provider or get reasonably priced cover with fair excess clauses from the limited number of insurers in the market.
Although the AITC says organisations such as Aifa may have to take the lead if it is found that IFAs are being hindered by PI providers, technical director Ian Sayers believes the AITC may be able to help through its new database.
Due to go live in a matter of weeks, the database will have details of the level of gearing in most investment trusts – the exceptions being non-members and those that refuse to volunteer the information – which will give a better indication of risk.
Sayers believes this could be used by IFAs to negotiate lower premiums with insurers which he believes do not always understand what they are dealing with.
He says: “It would clearly be of great concern if IFAs felt they were unable to advise on investment trust business in the future, even those who have been unaffected by the splits problems being experienced by a minority of trusts.”
Plan Invest joint managing director Michael Owen says: “It is important that both bodies work on this. The industry needs to think very seriously about such a big problem.”