A change to the rules on insolvent firms could raise premiums or force policy providers out of the market
The FCA says it wants to tighten up rules on professional indemnity insurance that could raise premiums or force policy providers to exit the market.
The regulator said it is consulting on changes that would prevent personal investment firms from buying PII policies that exclude claims when the policyholder or a third party is insolvent.
In an earlier call for comments, most respondents supported the proposal, but some worried that it would reduce capacity among PII providers and raise the cost of PII policies.
The change is part of a review of the operation of the Financial Services Compensation Scheme.
The FCA said it collected data from 15 large PI insurers, since which time one of the firms has exited the market.
Six of the firms said they don’t offer policies with the exclusions, did not think there would be a premium increase or were unable to provide an estimate. One respondent suggested a likely premium increase of 25%.
Seven providers said they would be likely to exit the market if the change was made. However, the FCA said, they collectively represented only a small proportion of the market.