FSCS hits back at Pimfa criticism

FSCS hits back at Pimfa criticism

The Financial Services Compensation Scheme (FSCS) argues it has "recovered millions of pounds from insurers" after criticism from the financial advisers' trade body.

The Personal Investment Management and Financial Advice Association (Pimfa) called yesterday (November 29) for a review of the FSCS, since it is "deeply concerned" the underlying reasons for the latest interim levy are not being tackled.

The scheme announced this week that the retail pool will pay an estimated extra levy of £69m, due to pension transfer and self-invested personal pension (Sipp) related claims.

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The trade body said it was unclear if the FSCS ever followed through on getting money it pays out back from professional indemnity (PI) insurance providers, who covered the firms who ceased to trade, which caused claims to end up with the scheme.

But a spokesman at the FSCS said: "The FSCS actively investigates if a firm had PI insurance on which we can seek a recovery.

"The FSCS pursues recoveries where reasonably possible and cost-effective to pursue. Over recent years, the FSCS has recovered millions of pounds from insurers for the benefit of levy-payers."

The spokesman also highlighted that new rules to come into force from 1 June 2019 "will mean that policies will not limit cover where the policyholder or a third party is insolvent, or where a person such as FSCS makes a claim on the policy".

He said this was "intended to ensure that more claims are paid by insurers, which will help to reduce the cost of FSCS to levy-payers."

The Financial Conduct Authority (FCA) has already reviewed the FSCS's funding mechanism and is implementing a number of steps next year to make life easier for advisers.

These include getting providers to contribute to the cost of the adviser levy.

Meanwhile, the regulator has announced it will ban advisers from taking out professional indemnity insurance policies which limit cover in cases of insolvency.

This will mean advice firms will have to have PI insurance which does not limit cover where the policyholder or a third party is insolvent, or where a person other than the advice firm, such as the FSCS itself, makes a claim on the policy.

FTAdviser reported on Wednesday (November 28) that financial advisers were disappointed with the announced interim levy and questioned if the current regulatory regime was fit for purpose.