Biba, launching Manifesto 2012, wants threshold condition 4 rules to be reformed

Biba has urged the FSA to cease its practice of making ad hoc judgments on whether brokers need to bolster their balance sheets.

Biba’s Manifesto 2012, which sets out the broker body’s key lobbying points for the year, says the TC (threshold condition) 4 rules should be reformed under a wider drive to cut the regulatory burden on the sector.

Under the TC4 rules, in place since the FSA took over the regulation of insurance intermediation in 2005, the FSA can insist a broker boosts its capital to ensure it has adequate resources in the event of insolvency.

In its response to a Treasury consultation on financial regulation last year, Biba raised concerns about the FSA’s intrusive approach to brokers’ balance sheets, including requiring firms to undertake stress tests.

The manifesto, published on Thursday, states: “If the regulator requires firms to hold more capital, that it should be on the basis of consulted upon and costed rules, rather than a judgmental approach.”

Outlining the manifesto exclusively to Insurance Times, Biba head of corporate affairs Graeme Trudgill said: “We want rules so they can’t make brokers increase their capital without having a reason. This also ties up capital that brokers can’t use to invest and grow.”

Other key lobbying points in the manifesto include:

• Separating general insurance brokers from secondary sellers of insurance when the FSA reforms the structure of the Financial Services Compensation Scheme.

• A roll-out of a government-backed service for signposting individuals and businesses that are struggling to obtain insurance to suitable products and providers.

• A call for the European Commission to maintain the UK’s existing commission disclosure on request arrangements when it publishes its reforms of the EU Insurance Mediation Directive in the spring.