The General Insurance Standards Council (GISC) is changing its rules regarding solvency margins following strong lobbying by angry broker trade bodies.

The British Insurance Brokers Association (Biba) and the Association of Insurance Intermediaries and Brokers (AIIB) protested that rules G24 and G28 were unworkable in their current form, as well as being unnecessarily harsh on brokers and intermediaries.

But under the changes, intermediaries will be able to count all premiums earned against their solvency margins.

Previously income from premiums taken in instalments was regarded as “earned” and not “received” unless a third party guaranteed the amounts due.

Intermediaries considered to be operating on an earned basis needed to have a 20% solvency margin over and above the assets of the company.

Operating on a received basis requires only that the member has sufficient assets to meet its liabilities as they become due.

A GISC spokeswoman said the reform was going to affect a large number of intermediaries. “This is going to make quite a big difference,” she said.

Mike Slack, chairman of the AIIB said this was the change that he and others had been calling for.

“Most brokers will now fall into the received commission category,” he said.

“The change is realistic and most people should be able to deal with it without a problem.”

Slack said he didn't think the people who drew up the rules appreciated how people on the ground dealt with business.

“You write the textbook and then you have the reality of what goes on in the world,” he said.

Slack predicted that other modifications and clarifications would have to be made to the rules in the future.

A spokeswoman for Biba said it was very pleased with the amendment.

“It does seem a direct response to our representations where we thought that some of the rules were prejudicial to some of our members.”


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