I read with interest the various articles, specifically this week (2 September, Insurance Times), on the subject of risk transfer where a chain of brokers is involved.
As a wholesale broker. We realised very early in the run up to FSA that wholesaleing is almost impossible unless the wholesale broker has confirmation of risk transfer. In our case we deal with 2500 plus brokers, and thousands of items a month paid to insurers. The accounting work required, and system costs to implement a regime of informing each broker every time an item is paid to an insurer, would make such a system unworkable.
We attempted to discuss this with FSA very early in the consulation process, but quite frankly did not seem to understand the problemsit is causing.
We have now agreed risk transfer with our carriers, but these rules, unless drastically amended, will bring the end to chains of brokers, but what will happen to the system of placing business into Lloyd's via a Lloyd's broker? Will the Lloyd's broker have the systems in place to confirm when items have been paid?
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