Brokers will be able to hold client and insurer monies in the same account until at least January 2006, said the FSA in its final rules published this week.
The industry now has the final rules on the conduct of business, prudential requirements and appointed representatives.
But despite the period of grace on account segregation, the FSA has stood firm on risk transfer. The market, it said, needed to resolve the question of when the broker was acting as agent of the insurer.
On the issue of segregated accounts, Eleanor Linton, head of policy and technical standards said: "Late in the day the market realised that client and insurer monies would have to be kept in separate accounts. This was not raised in consultation.
"We have therefore introduced a transition provision. Until Jan 2006 firms will be allowed to co-mingle client and insurer monies as they do now. In the meantime we will conduct further work to understand the difficulties, and further consultation if necessary."
The FSA also provided some clarification on credit risk transfer, giving examples of when a broker is deemed to be acting as the agent of an insurer, such as where a broker has a binding authority.
David Russell, prudential issues and London insurance market manager, said: "It is time for the market to find clarity on risk transfer. The rules give some clear examples of when it applies. It is not up to the FSA to cover every alternative. The market must decide when the rules apply and take legal advice."