The FSA has warned professional indemnity insurers it is prepared to take action against those attempting to sidestep liabilities in relation to Arch cru claims.
In a Dear CEO letter, FSA conduct business unit director of supervision Clive Adamson (pictured) says the regulator’s proposed £110m consumer redress scheme for Arch cru investors has sparked concerns from advisers that PI cover will not be in place for Arch cru claims.
Adamson says: “We have been contacted by IFAs who are concerned their PII cover may not operate as they expected it to. Specifically, firms have told us they have attempted to notify their insurers of circumstances which are likely to lead to a claim or, under certain policies, may lead to a claim, and have been told such notifications cannot be made simply on the basis that the FSA is consulting on a proposed consumer redress scheme.
“These firms are concerned that when they come to renew their policies, cover for Arch cru claims will be excluded and they will therefore face significant liabilities.”
Adamson adds: “We are prepared to consider taking action where insurers seek to breach or avoid their obligations to the detriment of consumers.”
The FSA has also asked PI insurers to provide details on how it deals with notification issues about potential claims, and the renewal terms they are offering to firms who recommended Arch cru funds.
Howden director of retail Neil Pointon, a PI broker, says: “The question is whether underwriters have grounds to exclude cover now because they are saying the redress scheme is not a notifiable event at this point in time. My advice is advisers should look to notify about claims and not wait until the Arch cru consultation is completed.”
IFA Solutions managing director Jamie Newel, another PI broker, says: “Every PI policy is different, particularly when it comes to notification of claims. It is a very grey area.”