Hardening PII market claims Honister Capital
Firms from across the UK – including London-based Radcliffe & Newlands, Ayrshire-based Alan F Kerr Financial Services and south Wales-based Myrddin Celtic Financial – received news last week that, as a result of being unable to obtain costly professional indemnity cover, Honister Capital Limited’s advisory business was going into administration.
On notification of this, the FSA immediately issued guidance online for consumers and for IFAs authorised by HCL, and revoked authorisation for all the appointed representatives of Sage Financial Services, Honister Partners and Burns Anderson limited.
The administration does not affect execution-only broker Willis Owen, also part of HCL.
In a letter to advisers, sent 5 July, Colman Moher, chief executive of HCL, said: “You will be aware the cost of PI cover to the sector has increased and, of course, renewal of this cover is essential for us to trade.”
He said because the firm had been exposed to claims from business written by advisers who had “long since left”, this has affected its premiums and extent of cover when negotiating PI renewal, and taking on the risk of exclusions imposed by insurance companies.
Mr Moher added: “It is with great regret and sadness that we have to inform you we have been unable to obtain PII, which means that HCL and its subsidiaries has entered administration and will cease to trade immediately.
“Consequently, you are no longer able to write new business with immediate effect.”
Mel Kenny, director of Radcliffe & Newlands, said: “I paid the price for other people’s failures. But there’s no point sitting on my hands awaiting re-authorisation – I can get other things done and stay positive.”
Networks and large IFA firms were quick to “stay positive”, offering help to the stranded advisers. Nick Kelly, managing director of Sesame Bankhall Group, said this “unfortunate” news demonstrated how the regulatory and economic pressure on firms is being compounded by a hardening PII market.
He said: “We are working with a number of Honister adviser firms. Sesame has a track record of helping adviser firms move across to a new, secure home quickly.”
Aegon-owned Positive Solutions’ chief executive Peter Coleman, a former Burns Anderson director himself, said: “Honister is a fine business and has some top-quality advisers. Positive Solutions would be happy to speak with any and all former appointed reps and get them registered as soon as possible.”
Keith Richards, group distribution and development director for Tenet, said that a week before Honister and its administrators Grant Thornton made the announcement, Tenet tried to conduct a bulk transfer of the ARs and its client books, but this failed.
He said: “We approached the FSA to inquire about the possibility of a block transfer but regret it is not minded to allow an application as a matter of current policy, rather than specific to Honister advisers.