A review of the crippling European Union professional indemnity insurance requirements for IFAs is under way and is scheduled to be completed by April 2005.
As things stand, the insurance mediation directive, requiring firms to have £1m in professional indemnity cover, comes into effect in January 2005, to be followed in April 2006 by the market in financial instruments directive, requiring firms to have £500,000 extra cover, set aside £30,000 capital or have a combination of the two in place.
However, Money Marketing has learned there is a requirement in Mifid for the European Commission to review the PI requirements under both directives by April 2005 at the latest, with a possible scenario of a conclusion before the end of the year.
It is hoped that the review could lead to more flexible and reduced requirements for intermediaries, including an ability for regulators to grant waivers as well as a trade-off between PI and capital adequacy.
Aifa says it is preparing its case for when the EC asks for submissions.
Aifa director of policy Fay Goddard says: “The European Commission has to review PI requirements by April 2005 at the latest, so it may come to its conclusions earlier. The best-case scenario would be if it concluded its review before the IMD kicks in.”
Park Row Group head of business development Jo Smith says: “Anything which gives us some consistency in the treatment of professional indemnity cover and flexibility in how it is adopted has to be a good thing.”