Tenet has withdrawn from talks on a proposed collective insurance deal to cover historical liabilities over concerns it could be forced to subsidise riskier networks, Money Marketing understands.
In January, Money Marketing revealed a group of networks were in talks with insurance broker Marsh UK. It was hoped a deal could be agreed to insure on a collective basis against complaints and fines relating to past business.
Sources close to the discussions say some distributors are concerned other firms involved in the negotiations will be seen as high-risk by prospective insurers, bumping up the price of a potential deal and forcing lower-risk networks to cross-subsidise their rivals.
Tenet was heavily involved in the early discussions but has since dropped out. It remains unclear how many firms are still involved in talks with Marsh.
Networks have previously voiced concerns about the lack of a long-stop for the advice industry, leaving them exposed to potentially costly bills relating to past business.
The FCA has confirmed it will consult on a possible 15-year long-stop. However, the proposed insurance deal would effectively cap networks’ exposure to historical liability risk.
Plan Money director Peter Chadborn says: “The pooled risk of all the advisers within a network is hard enough to quantify. Pricing the risk of a group of networks will be even more difficult. If a deal could be done, it would give me more comfort in being part of a network because there is always a fear that if a network has not calculated its risk accurately and cannot absorb a regulatory hit, it could crumble.”
Aurora Financial Planning chartered financial planner Aj Somal says: “This is an interesting development and may suggest the cost of brokering a deal is too high.
“If a deal could be agreed, it would put networks in a much more stable position. But the cost of insuring that risk would have to be passed on to members in increased fees, which makes it difficult as that could have a negative effect by reducing membership numbers.”
Marsh and Tenet declined to comment.