The professional indemnity crisis will force “bad IFAs” to fold because they cannot get cover, making it easier for “good IFAs” to find affordable cover, according to FSA head of investment firms David Kenmir.
He says in some ways this is a good thing because it will leave a stronger IFA sector which will increase confidence in the market as whole.
Kenmir is keen to stress that his comments do not mean the FSA has changed its stance on the PI market, saying he is still working with IFA firms to find a solution to the problem.
But Aifa says that Kenmir appears to be assuming that IFAs are being underwritten individually when, in reality, the majority of IFAs are being underwritten on the same basis, leaving both good and bad IFAs unable to find cover.
Until now, the industry has given credit to Kenmir and his team's efforts to resolve the PI crisis, saying it has demonstrated a willingness to tackle the issue head on.
This latest statement may lead many to reconsider.
LIA head of public affairs John Ellis says: “I think it shows an astonishing degree of complacency about the situation at a time when it is extremely worrying. I think they certainly do have a crisis on their hands.”
Aifa director general Paul Smee says: “This assumes that everyone is being properly underwritten when it appears quite clear that this is not the case. Besides, it is the regulator's job to get rid of bad IFAs, not the PI market's.”
Kenmir says: “If the situation means that the bad IFAs have to leave the industry because they cannot get cover, it would lead to more cover available for the good IFAs which would increase confidence in the market as a whole.”