IFA CFS Independent is setting up a captive professional indemnity insurance scheme and is looking for other IFAs to come on board.
Managing director Andy Harwood envisages a Guernsey-based scheme with around 50 IFAs all paying an average premium of £15,000, giving a total pot of £750,000.
If, as Harwood anticipates, cover of £1.5m is needed, the shortfall of £750,000 would be met by a guarantee, with each firm committing itself to an additional £15,000 if necessary.
However, he says there may be a refund if claims' experience is favourable, which he expects if other participants have similar experience to CFS. Harwood believes a captive scheme would benefit IFAs which are unable to find PI cover or are paying exorbitant premiums.
He says participants would need to be underwritten in terms of claims' experience but points out that just because an IFA cannot get PI cover does not mean they are high-risk.
Harwood says: ” IFAs interested in finding out more about such a scheme should get in touch.” His website is www. cfsindependent.com.
Collegiate managing director Tony Howe says: “I think if this is done properly, with people on board who are happy to share the risk, then it could be very advantageous and certainly takes advantage of the new rules. The only thing that stands in its way is if participants are not happy sharing risk with each other.”