IFAs would be able to offset their professional indemnity insurance excess against their capital reserves and firms with annual turnovers of £10m or more would be exempt from PI cover under proposals outlined by the FSA this week.
Director of investment firms David Kenmir says the 5 per cent of IFA firms with £10m or more in annual turnover, such as IFA Falcon Group, as reported in last week's issue of Money Marketing, would be able to apply for an exemption from having PI cover.
The current floor for firms wanting an exemption is£50m in capital.
In a series of wide-ranging proposals for solving the PI crisis gripping the IFA sector, the FSA also confirmed that it would publish a definition of misselling “very soon”.
It said that by July it would make permanent the temporary measures that it introduced last year which are aimed at encouraging PI underwriters to return to the IFA market.
The paper also said that 87 per cent of PI policies taken out since September 2002 have been underwritten by Chubb and Lloyd's syndicates such as Magian and St Pauls. It goes on to say Magian has recently announced it has stopped underwriting PI for IFAs.
Syndaxi Financial Planning principal Robert Reid says: “There are only so many companies out there with capacity to take on new risk. I do not think that anything in these proposals will encourage insurers to come back into the market.”