PI start-up income slips to £10m after FSA relaxed PI for IFAs
FSA regulation stifled the growth of new start-up underwriter Magian, according to parent PI Direct.
The insurer initially planned Magian Underwriting, the mutual insurer set up last year to provide cover for Independent Financial Advisers (IFAs), to underwrite £15m in premium income in its first year. But this figure was revised following the publication last year of CP193, which relaxed professional indemnity (PI) insurance requirements for IFAs.
PI Direct then expected Magian to underwrite premium income of around £10m in its first full year.
But overall the company had a good year. PI Direct made a pre-tax profit of £1.25m in the 12 months to 31 October 2003.
This compared to a pre-tax profit of £1.47m for the 14-month period to the end of October 2002. Turnover for the period was £4.5m, compared to £4.4m in the 14-month period.
Gross written premium (GWP) for the year stood at £26m. The insurer said it was planning to increase its GWP to £40m in 2004.
The figures include results for five months of business at Magian, which has around 400 members and has underwritten premium income of around £7m.
Last week, Markel said the involvement of Grant Thornton and Deloitte & Touche in the Parmalat scandal, described as "the European equivalent of Enron," could push PI rates up.
Following the collapse of Enron, solicitors' PI rates increased by up to 500%.
Zurich Professional could face a hefty claim relating to the Parmalat scandal as it has provided some PI cover for the Italian arm of Grant Thornton, according to one PI broker.