Q&A

Question:We are brokers, and we have commercial clients to whom we supply master policies. These allow them to provide insurance to their customers, some on an optional basis, some non-optional, as part of a package for their services to their clients.Some examples are plant hire firms, who offer optional cover on their plant to their customers, and exhibition organisers who include exhibition insurance as a standard part of their service package.I am sure there are many thousands of businesses providing cover to their customers in this way. It is unclear to me whether these clients can take advantage of the exemptions offered in the perimeter guidance, as most of the examples refer to retail situations.Can you advise if they need to seek FSA authorisation?

Answer:The FSA has summarised this aspect of the Perimeter Guidance in its Factsheet No.8 Will I need to be Authorised? Working through this step-by-step guide in the context of your question:Step 1 - Am I carrying on a regulated activity in the UK? Yes, as your client arranges the purchase of insurance policies - it helps someone fill in an application form and it must act as agent by issuing a cover note to its customer.Step 2 - Am I carrying on a regulated activity by way of business? Yes, as the activity provides a direct financial benefit to your firm.Step 3 - Are the regulated activities that I am carrying on excluded? Having answered yes to 1 and 2 you can only benefit from the exclusion if you can demonstrate that the provision of this information is incidental to your main business and satisfies certain criteria. The main ones that I suspect would cause your clients a problem is that the annual premium must be less than ¤500 and third party liability is not covered.So it very much depends on the scope of the cover provided and the annual premium. But I suspect your client's master policy will include third party risk and that premiums will be above the limit, so FSA authorisation beckons.Gary Dixon managing director Compliance Solutions