The threat of a hard hitting regulatory solution aimed at achieving contract certainty appeared to recede this week, following the publication of a 'Dear CEO' letter by the FSA.

The FSA said, in the letter, that its current assessment is that "enough progress had been made [by the insurance market] to keep regulatory intervention on hold", although this was still under review.

The regulator added, however, that it had some concerns that some firms, particularly outside the London market, were not taking the matter seriously enough.

The FSA said it would wait until the end of January before taking a final decision on whether to introduce a regulatory solution to the 'deal now, detail later' culture. But the timing and content of the letter raised questions as to whether a decision had effectively been taken by the regulator.

With just three weeks to make progress on the FSA's action points, compliance experts speculated

that the FSA would not invoke a regulatory solution.

Steve White, Biba's head of compliance and training said: "The timing is interesting. The FSA doesn't appear to have the appetite to write a rule. Why reveal where the bear traps are if you want people to fall into them?"

Asked whether the letter indicated that the FSA had already made up its mind on contract certainty, an FSA spokesman did not deny this. He said: "The purpose of the letter is to encourage firms to get to grips with contract certainty. Contract certainty will continue to be an objective following the announcement on 24 January."

Clive Wood, Royal & SunAlliance head of UK regulatory risk and compliance, who sits on the non-subscription working group, said that several projects were currently in progress. He said the group would report on the development of the projects in early January.

"We will be looking at what is working and what isn't and giving some feedback to the FSA on this. This is fundamentally a market solution.

"We are not where we want to be, there is still a long journey ahead of us. But at least we are making some progress."