Aifa is in talks with the ABI, the FSA, product providers and professional indemnity underwriters about the possibility of forming a captive PI insurer selling cover exclusively to IFAs.
In CP169, Professional Indemnity Insurance for Personal Investment Firms, published this week, the FSA outlines the possibility of a mutually run scheme to cover IFAs'PI needs but this is already being overshadowed by talk of an IFA-only PI underwriter.
FSA director of investment firms David Kenmir told Money Marketing that while the idea of a mutual scheme is a key point in the paper, it does not resolve all the issues involved in the market.
Aifa director of policy Fay Goddard stresses that it is early days for the scheme but confirms there are interested parties working towards the establishment of a commercial insurer selling PI cover only to IFAs.
The firm would be an authorised insurer and would be run and administered by existing PI underwriters.
Polices would be individually underwritten. The firm would be profit-driven but, as it would not have exposure to other types of risk, it would be able to offer cover at lower rates to IFAs.
The majority of premiums collected would be used to pay out claims, with a contingency fund held back to cover unexpected increases in claims.
Goddard says: “We have been facilitating discussions with providers, the FSA and current underwriters in the market about the possibility of creating an insurance scheme set up as an authorised insurer and run on a commercial basis for IFAs.”
Kenmir says: “Mutuals per se do not necessarily deal with all of the issues. We have been approached with the idea of setting up an insurance company, purely for IFAs run on a commercial basis.”
ABI spokeswoman Leonie Edwards says: “We are talking with Aifa about this issue.”