The Financial Services Compensation Scheme has said incoming rules will help address concerns it does not do enough to claw back fund from personal indemnity insurance providers to offset compensation bills.
Yesterday, adviser trade body Pimfa called for the lifeboat fund to provide more information on how it pursues and uses money from PI provider in the event of a firm’s collapse.
The trade body is pursuing a review of how funds are recouped from PII in light of another proposed interim levy from the FSCS earlier this week totalling £69m.
The trade body is suggesting clawback could be used to lessen the burden on levy-payers.
Speaking to Money Marketing, an FSCS spokesman says its new rules from 1 June 2019 will address concerns, however.
He says: “It will mean that policies will not limit cover where the policyholder or a third party is insolvent, or where a person such as FSCS makes a claim on the policy – which is intended to ensure that more claims are paid by insurers.”
The lifeboat fund also provided some more details on the situations in which it seeks to recover money from PI as opposed to general advisers who contribute fees to the compensation pool.
It says: “Over recent years, the FSCS has recovered millions of pounds from insurers for the benefit of levy-payers. We actively investigate if a firm had PI insurance on which we can seek a recovery [and] pursue that recovery where reasonably possible and cost-effective to pursue.”
The introduction of the new interim levy has met plenty of backlash since its announcement on Wednesday.
Its neccessity has been blamed on poor advice on defined benefit transfers leading to increases in Sipp and other pension failures.
FSCS chief executive Mark Neale says: “We expect a deficit by year end of just under £70m. This will, I am afraid, necessitate a supplementary levy falling on the retail pool.”