The Institute of Insurance Brokers (IIB) has expressed concerns regarding the levies required from brokers to fund the Financial Services Compensation Scheme (FSCS).
In its response to FSA paper CP174 the IIB said that under FSA proposals the FSCS would be available to consumers in respect of losses arising from insurance mediation.
However the IIB warned: "It must be remembered that brokers, unlike insurers, are unable to factor anticipated or settled levies into premiums charged to policyholders at the point of sale. This is why brokers are extremely worried about their potential exposure under the regulatory environment ahead."
The IIB also stated in its response that individual FSCS awards should be capped at the minimum professional indemnity (PI) insurance limit ultimately prescribed by the FSA - currently proposed as £700,000.
The IIB warned that failure to do this would mean brokers ending up paying for brokers with an inadequate PI limit.
The IIB was also concerned that should the FSA authorise firms that cannot demonstrate before January 2005 that their Insurance Broking Account (IBA) balances properly, compliant firms could be exposed to compensation for clients' funds that may have been misapplied by other intermediaries.
