Brokers will be able to hold client and insurer monies in the same account under proposals outlined in the latest FSA consultation paper.

The FSA proposes that co-mingling would be allowed provided the insurer "gives his consent in writing and accepts that his claim to such monies would be subordinated to actual client claims".

The proposal effectively extends indefinitely the transitional provision on co-mingling published in January in PS174.

Brokers and insurers reacted positively to the consultation. One broker said: "It moves things much closer to a practical solution which the old system didn't provide.

"But we need to make absolutely certain that everyone responds to the paper."

The consultation period closes on 30 September.