I read with interest the various articles, specifically Louise Gill (2 September, Insurance Times) on the subject of risk transfer where a chain of brokers is involved.

Leisureinsure is a wholesale broker. We realised very early in the run-up to regulation that wholesaling is almost impossible unless the wholesale broker has confirmation of risk transfer from his insurance undertaking.

In our case we deal with 2,500 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 the FSA very early in the consultation process, but it did not seem to be interested, nor understand the problems it was causing.

In our case, we have agreed risk transfer with our carriers, so the problem does not arise.

But I see these rules, unless drastically amended, bringing to an end chains of brokers (not a bad thing in my view) - 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?

I somehow doubt it; and knowing the delays - in some cases many months, before a Lloyd's broker pays the syndicate - many provincial brokers will end up accounting for client money many months after it has left their account.

Paul Hudson

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