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Law360, London (April 22, 2020, 12:30 PM BST ) The City watchdog said it will not relax rules that compel financial advisers to have mandatory professional indemnity insurance, despite concerns from trade bodies that the coronavirus pandemic has limited the ability of companies to renew policies.
The Financial Conduct Authority said in a statement on Tuesday that cover is still available in the market for advisers and is therefore still a requirement.
Professional advisers, particularly those working in pensions transfers advice, have been hit by soaring professional indemnity premiums in recent years.
The Personal Finance Society wrote to the FCA last month to ask it to waive the requirement for four months for companies searching for cover, saying the pandemic had further narrowed the market.
But the regulator is holding its ground.
"Our position remains that firms need to have PII policies in place, in accordance with our rules, to support their ability to meet liabilities as they fall due and to protect their consumers," the FCA said. "It is ultimately a commercial decision for insurers about what cover they will offer, including cost and on what terms."
The watchdog said it had spoken to the International Underwriting Association, as well as brokers and insurers in the market over the options available.
"Our discussions indicate that [professional indemnity insurance] cover remains available in the market and the crisis is not preventing insurers from undertaking the renewals process," the FCA added.
Britain's pensions freedoms rules allow savers to transfer retirement funds out of gold-plated schemes into riskier investments that promise higher rewards. Insurers have hiked premiums for companies in the sector because of a growth in the number of complaints against advisers.
That has contributed to a 500% rise in the cost of cover for some companies, the Personal Finance Society said, effectively pricing smaller players out of the market. The society said that last year 30 of its members had stopped offering pensions transfer advice because of the rising cost of insurance.
--Editing by Ed Harris.
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