Pressure is mounting on the FSA to make the risk transfer of client money to insurers mandatory.
As reported exclusively in Insurance Times (19 June), brokers Paul Meehan, Stuart Reid, Chris Blackham and Grant Ellis, representing a group of UK retail brokers, met the FSA on 30 June to discuss the issue.
The brokers believe that compulsory risk transfer simply maintains the status quo, because agency agreements state that brokers hold premiums "in trust for" or "for and on behalf of" insurers. In CP174, the FSA proposes guaranteeing client money by either transferring the risk to insurers or by setting up segregated accounts under a trust. As a result of the meeting, the FSA's legal team is considering the issue.
The brokers have retained law firm Berwin Leighton Paisner to produce an opinion supporting their argument, and are gathering support from other brokers to present to the FSA when they meet again on 18 July.
Those who have thrown their weight behind the issue so far include Smart & Cook, Stuart Alexander, The Broker Network, Layton Blackham, Alec Finch & Company, Giles Insurance Brokers, Perkins Slade, Bland Bankart, Thomas Carroll, RP Hodson, Marshall Ewart & Graham, Creamers, Atkinson Smith, DE Ford, Rixon Matthews Appleyard, Griffiths & Armour, Central Insurance Services, Bartholomew & James, Bruce Stevenson Risk Management, TL Dallas, John Eke & Partners, Ryan Insurance Group, Sutton Winson and Tysers.
Biba chief executive Mike Williams, who supports risk transfer, said the Biba board was due to meet yesterday to consider the issue.
According to the consultation paper risk transfer provides a simple, cheap method of ensuring consumer protection. In contrast, segregated client accounts will increase broker costs, prevent commission from being drawn until it is received and result in more onerous solvency hurdles.
If risk transfer is not adopted, in the event of a broker collapse consumers will have recourse to a broker-funded compensation scheme.
Blackham said: "Insurers grant agencies to brokers and it is inequitable that a broker should be responsible in anyway for insurers and their decisions.
"This issue is of importance to every broker. The FSA is listening but brokers need to make their views known individually, and not just through Biba," Reid said. "Email us at
yes@4risktransfer.co.uk "
