View more on these topics

PII exclusions will push up capital requirements

Firms with business lines excluded under their professional indemnity insurance policy will now have to hold a minimum level of additional capital resources, according to the FSA.

Current rules do not specify the amount of additional capital that needs to be held.

But the regulator’s review of the prudential rules for personal investment firms found that minimum capital limits are necessary to ensure firms are covered in the event of a liability.

The regulator estimates that 2 per cent of firms will need to hold additional capital resources to cover their PII exclusions under the proposals. It says this will require total additional capital of £1.6m during benign periods. with firms having to hold additional capital resources of at least £67,000.

However, it says when PI is harder to obtain these requirements will impose higher costs. It says then additional costs to advisers at 5 per cent PII exclusion rate would be around £4m and at 20 per cent £15.9m, working out at £168,000 and £668,000 each respectively.


Recommended

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com