The FSA is calling on the European Commission for an early review of the directive that has poured fuel on the fire which is the IFA professional indemnity crisis by requiring £1m cover for all firms.
FSA managing director David Kenmir told the Money Marketing IFA round table last week that he favours dropping the £1m per firm requirement, replacing it with a flexible system allowing com-panies to reserve capital against liabilities based on potential risks in their book of business.
At a recent meeting in London, the FSA spelt out to EU financial services regulators the problems that their intermediary sectors would face when complying with the PI requirements of the Insurance Mediation Directive.
Explaining the shortage of supply in the PI market, Kenmir said Greek intermediaries expect to get PI cover from Lloyd's insurance syndicates, when the few Lloyd's brokers still offering PI cover say it is unlikely they will target foreign markets.
Kenmir said resistance to the IMD failed because of political horse trading but the Treasury and the FSA have won the early review clause which is now being used to challenge the directive.
Kenmir also expressed disappointment that more IFAs have not applied for PI waivers – so far, only taken by 100 firms – although he admitted this flexibility would disappear from January when the IMD takes effect.
He said: “We are trying to get the European Commission to start the review of the IMD rather earlier than they otherwise might do and we will be talking with them about that over the coming months.”
Collegiate Insurance Brokers marketing director Fergus Chappel says: “Firms that have had waivers will certainly not find it any easier to find PI this time round. The reasons that many of them sought a waiver before will still be there and the market has since seen increased demand.”