FSA decision to regulate would increase market for PI cover

Professional indemnity (PI) insurers are set for a boost if the FSA decides to regulate risk managers.

The FSA has yet to make a decision on whether risk managers will fall under its remit.

If they are regulated, insurers will benefit from a new market for PI cover.

Allianz Global Risks general manager Horst Hanauer said the market would see significant growth in the appetite for PI cover if the FSA opted for regulation.

"If the risk management function was regulated, there would be an increased demand for PI cover," Hanauer said.

But this potential market could be diminished if risk managers carry out their threat to quit the UK should the FSA decide to regulate them.

Last week, an Airmic survey found that one in eight risk managers said they would leave Britain if the FSA were to directly regulate risk managers.

Meanwhile, the PI market could be set for a further boost if IT security contractors take expert advice and purchase PI cover.

IT law specialist Masons recently warned contractors working on IT security systems that they were at risk of being sued if their clients' systems were compromised.

One leading Lloyd's PI broker said that while IT security specialists working within large companies often had cover, smaller independent contractors were particularly at risk.

"The people that tend to have the problem are the self-employed sole practitioners who contract themselves out to large companies," the broker said.

"There is potential for growth in this market because the electronic revolution is still going on."