Magian Mutual is planning to extend professional indemnity insurance to mortgage brokers when regulation of the sector starts in October.
The firm was formed last May when underwriter PI Direct bought Magian. So far, it has only dealt with IFA clients but director Glyn Morris hopes to extend its remit to mortgage brokers.
Morris says this will involve a rule change as Magian currently only covers personal investment firms. He is drafting a rule change which he hopes will be agreed by members at Magian's AGM in September.
Mortgage brokers are seen as lower risk than IFAs but PI broker Collegiate has said that regulation coupled with rising interest rates and unemployment could send premiums soaring.
Morris is warning IFAs that time is running out to to secure cover which is compliant with the insurance mediation directive. The IMD, which comes into effect in January next year, will require firms to have £1m in PI cover.
Morris says a lot of PI capacity comes from Lloyd's which has an underwriting year that runs from January to December. If capacity is managed correctly by Lloyd's, it will be running out at the end of the year so insurers will be unlikely to be able to accept new business, meaning a reduced market for IFAs.
Morris says: “A lot of PI capacity comes from Lloyd's and it starts to run out at the end of the year. IFAs should not leave securing cover to the end of the year.
“We hope to make cover available to mortgage brokers who operate professional practices. We do not want to dilute the quality of our members.”