Michael Faulkner and Sarah Kennedy analyse this week's burning issues in the insurance world

The season of goodwill is over – Michael Faulkner

The FSA’s moratorium on goodwill came to an end last week. Brokers will no longer be able to use goodwill – the intangible asset acquired when a business is bought – when calculating their capital requirements.

As a result, brokers will have had to restructure their business to plug the gap in the balance sheets left by the removal of goodwill.

The FSA has said it will act quickly against those that do not and could ultimately close them down if the matter isn’t resolved swiftly. Brokers have had three years to address the matter.How many brokers are likely to be affected by this? The answer is that no one, not even the FSA, has a definitive answer.

Last year the regulator wrote to approximately 600 brokers, which it had identified from regulatory returns as potentially having a problem with goodwill, warning them to take action.

A few months later the regulator again contacted a number of brokers – it would not say how many – about which it had serious concern. The question is, how many of these took action? Many brokers left it to the last minute. Senior people within the insurance market have suggested that as many as a few hundred brokers could have failed to address their goodwill issues in time.

Whether that proves to be the case remains to be seen. But the actual figure may never come to light.

The FSA will shut some down, but it will also look to take less severe action, where possible.

Struggling brokers may also be snapped up by consolidators, possibly at a bargain price – although some question whether a broker that has failed to address its goodwill issues is a good acquisition target.

The major insurers do not appear to be unduly concerned about the possibility of brokers being shut down for failing to deal with their goodwill.

The affected brokers are likely to be very small in size, and their clients quickly snapped up by rivals.

Could the wait be over for brokers? – Sarah Kennedy

or the last four years brokers complained that commercial online trading platform imarket wasn’t at the stage they wanted it to be. With a market penetration of 100 to 150 brokers using the portal for integrated trading, it isn’t exactly where insurers wanted imarket to be either.

But 2008 may see the silver lining the industry has been waiting for in terms of launching the commercial market into the modern world.

Insurecom recently announced that it will become the leading software house for imarket products, boldly stating its plans to surpass software house Acturis within the next six months. A dose of healthy competition is exactly what imarket needs to expand and grow into the major trading platform large insurers had expected when investing up to £15m over the last four years.

Brokers have complained that there were simply not enough products being offered through imarket and due, in some cases, to the software systems of insurers themselves, brokers were also receiving referrals and declines for the products that were available.

One of the main challenges has been getting software houses to come on board in order to link insurers to the portal. Acturis became the first fully integrated company to do so, followed, to a lesser extent by Sirius, which offered a limited number of products.

Other software houses have piloted imarket but have not become fully integrated.

Insurecom’s decision to play a more dominant role with imarket could up the ante and be exactly what is needed to get other software houses to move from pilot programs to full integration.

The more software houses involved, the more brokers will be connected to the portal to access quotes by insurers.

Martin McLachlan, managing director for Polaris, which runs imarket, has admitted they may have been too ambitious initially when they laid out their goals for the online trading platform four years ago. Getting the system up and running has been a time consuming task, he said. The good news, as supporters of imarket are quick to point out, is that the technology works. It’s just a matter of getting all the proper players on board.

If Insurecom is any indication, the wait might finally be over for brokers in 2008.