Clerical Medical's plan to offer a professional indemnity insurance solution to IFAs has been torpedoed by the EU directive that outlaws self-insurance.
The company had been in talks with the FSA over an intermediary PI proposal based on IFAs self-insuring but now says that the European insurance mediation directive coming in next January means the project has been put on hold indefinitely.
Last November, Money Marketing reported that Clerical was looking at ways to offer IFAs loans through HBOS corporate banking that would raise firms' capital adequacy and remove the requirement for PI insurance.
Work on how to structure the deal so it would not be counted as a liability that effectively left capital adequacy unchanged was abandoned when the IMD banned capital adequacy solutions.
Clerical market development manager Charles Evans, who was behind the original plan, is now looking at ways around the new EU rules but says a fresh solution is not guaranteed. Evans anticipates that the PI market will become more difficult for IFAs when regulation of mortgages and general insurance places more demand on the market.
Evans says: “We are now faced with European Union rules which mean that self-insurance will not be allowed at all in 2005. The solution that we thought we had will not work at all in the new environment so we are back to the drawing board.”
Fidelius director Mark Osland says: “Unfortunately, I think it will be difficult for Clerical Medical to offer an insurance product that gives £1m cover to thousands of IFAs. This is just another in a flood of EU directives that frustrates businesses.”