Confidence in the premium finance market has lifted today with GTCR’s purchase of major player
Brokers with premium finance deals breathed a sigh of relief today as the future of Premium Credit was assured by private equity firm GTCR, which bought the insurer for £900m from Bank of America arm MBNA Europe.
The UK premium credit market is huge, but marked by a lack of insurers in the sector. The two dominant players are Premium Credit and Close Premium Finance, although many brokers run their own premium finance deals.
So the sale of Premium Credit is a vote of confidence in the market, especially when the vote comes from the notoriously hyper-critical private equity sector.
The investment means that GTCR must also think that the way premium finance products are sold by brokers is sound. This is significant given last week’s news that the FSA is conducting a probe into how brokers sell premium credit policies.
Brokers will be ‘unscathed’ by investigation
The outcome of the probe is uncertain, though Close Premium Finance managing director Janet Wilson has said that brokers will come out unscathed.
But there is still a possibility that the FSA could decide that the way some brokers crank up premium credit commissions to their clients is unfair, and this could lead to the FSA or incoming FCA regulating this sector more closely.
If the regulatory spotlight does fall on brokers’ in-house deals, at lease the GTCR deal means lack of capacity will not be an issue.
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