Magian Mutual says it will be very wary of offering professional indemnity cover to intermediaries which have carried out a significant amount of nonregulated business.
The statement comes after leading broker Direct Life & Pensions revealed in Money Marketing last week that it was told by its PI broker it would have to disclose any critical-illness rebroking it had been involved in before its PI would be renewed next year.
Magian Mutual director Glyn Morris has gone a step further, saying he has issues not just with critical-illness rebroking but with all nonregulated business.
Morris believes that the FSA has a tendency to look at previously unregulated business – in this case, mortgage and protection business – retrospectively. He says his firm, one of the few PI insurers to take on new business over the past 12 months, will be treading very carefully when offering cover to intermediaries who carry out a significant amount of non-regulated business.
Life Policies Direct director Jason King says the introduction of retrospective legislation for protection would not surprise him because the FSA has taken such an approach historically. However, he would find it difficult to pinpoint which aspect of protection the FSA would be litigious about.
Morris says: “We are going to tread very carefully when it comes to offering cover for an intermediary who has been doing a significant amount of non-regulated business. We fear that whenever regulation takes over, a degree of retrospectiveness goes on.”
King says: “I can understand Magian's approach because retrospective action could happen. However, I am fairly confident our PI will reduce – we have always treated protection as a regulated product.”