Brokers' fears that insurers will rewrite agency agreements to avoid risk transfer look set to be realised.
Royal & SunAlliance (R&SA) became the first insurer to admit it would be looking to avoid the controversial issue of bearing the risk of client monies.
R&SA FSMA programme director, Blythe Morris said: "We will be reviewing our agency agreements. Risk transfer is not an issue we are comfortable with."
Other insurers are keeping their cards close to their chest.
Norwich Union (NU) intermediary business director Ken Wallace said that NU would be rewriting its agency agreements next year and that risk transfer "would be looked at".
AXA head of compliance Ian Holloway said that the decision on whether the insurer would rewrite its agency agreements would be "a commercial decision". Zurich said it was still considering its position.
Following the publication last week of the FSA's final rules on prudential and other requirements for brokers, PS174, brokers were up in arms that the regulator decided to make risk transfer discretionary for insurance firms.
But FSA high street firms division, prudential issues and London insurance market manager, David Russell said insurers might change these agreements. "When insurance companies looked at their agreements they were surprised. They found their agreements had grown organically and that they had taken on more responsibility than they had anticipated," said Russell.
Brokers also voiced this concern. Mike Williams, speaking as Biba chief executive, said: "I'd be surprised if insurers didn't look long and hard at their agreements. "There's not a cat in hell's chance of every broker being treated equally. Insurers will differentiate [on whether to permit risk transfer].
"There should be a standard framework on the non-competitive aspects of terms of business and agency agreements. We would support the idea of a number of principles, whether they incorporate risk transfer or not."
