The crisis facing 600 independent financial advisers over their professional insurance is set to be averted.

Professional indemnity (PI) insurers are ready to back the £10m of premiums needed to cover the firms that have been trading with waivers, when the waivers expire in January 2005.

Currently, the FSA allows IFAs that find difficulty in obtaining PI cover to apply for a waiver allowing them to trade without cover.

It is understood that there are currently over 600 IFAs in the UK that either have waivers or are trading without PI cover. Insurers estimated that if those IFAs managed to secure cover it would be worth around £10m in premium income to the PI market.

"There is a lot of potential premium that is not being paid into the market as a significant number of medium to large firms have waivers," one PI underwriter said this week.

Last year, the mutual insurer Magian Underwriting was established to provide cover for IFAs.

Magian was initially expected to underwrite £15m in premium income in its first year, but this figure was revised to around £10m following the publication of CP193, which relaxed PI requirements for IFAs.