The threat of a tough FSA solution to the problem of contract certainty faded significantly this week after the regulator said the insurance industry had exceeded its targets.
The FSA announced it had "put on hold" plans to develop new rules to govern the industry given the positive feedback from the contract certainty steering group.
But it warned it would reassess the market's performance in June and would impose rules if necessary.
The industry had been threatened with measures such as capital loading if it did not stamp out the "deal now, detail later" culture traditionally endemic in the London market.
FSA chief executive John Tiner said: "We have received the results and there is no doubt that the market has made good progress. The figures provided by the steering group indicate that the market has exceeded both its targets and our expectations."
In December 2005, the London market had achieved contract certainty in 65% of all policies, against a target of 30%.
But Tiner warned against complacency. "The market must continue to stretch itself to guarantee the challenge set by the end of year."
The FSA will revisit the question of contract certainty in June to determine whether the industry is on track to meet its targets. "We will not hesitate in consulting on new rules, should progress falter," said Tiner.
The market was galvanised into action on contract certainty in December 2004 when Tiner said the regulator would enforce rules in December 2006 if the industry failed to address the issue.
Dane Douetil, chairman of Lloyd's market reform group, said: "We are determined not to lose any of the current momentum, and to ensure the 85% end-of-year target is achieved.
Tiner signaled the same approach could be adopted when assessing whether brokers had addressed conflicts of interest.
The FSA threatened to make commission disclosure mandatory if brokers failed to address "inherent" conflicts.
Tiner said: "We will take another look in the coming months at how intermediaries manage these conflicts. In the meantime I would stress, once again, my strong preference for a market-led solution."
' On 4 April, Global Reinsurance is staging its second Countdown to Contract Certainty Question Time panel discussion at the CII Insurance Hall in London. For further information, contact Sarah Pope on 020 7618 3470, or email sarah.pope@newsquestspecialistmedia.com
