The adviser trade body has called on the Financial Conduct Authority to postpone the implementation of the Financial Ombudsman Service’s compensation rise.
The Personal Investment Management & Financial Advice Association today (March 25) warned the regulator must "immediately" postpone the implementation of the new rules and revisit the impact of the changes on the professional indemnity insurance market.
Earlier this month the FCA confirmed the ombudsman's compensation limit would rise from £150,000 to £350,000 from April 1, despite insurers forecasting a worst-case scenario could see PI insurance premiums jump by 500 per cent.
Pimfa confirmed it had assessed the impact of the rise on its member firms, particularly those who are currently seeking to renew their PI insurance, and found a number of insurance companies were not yet in a position to confirm whether or not they will be able to offer terms "reflecting the increased limit".
The trade body warned this meant many companies currently seeking to renew their cover will not be able to obtain cover reflecting the increased Fos limit by April 1.
A Pimfa spokesperson said: "The impact on the PI insurance market was an area of key concern flagged by Pimfa in our submission to the consultation paper.
"We are disappointed that in setting an implementation date of April 1, 2019, the FCA has failed to properly assess the impact on insurance companies and their ability to offer terms reflecting the changes in the compensation limit.
"The FCA must immediately postpone the implementation of the rules and revisit the impact of the increase in the compensation limit on the PI insurance market."
Following the regulator's decision to proceed with its changes to the compensation limit, industry experts warned the FCA had underestimated the potential impact on the industry with suggestions the increase could also see more consumers left to fend for themselves or becoming victims to scams.
The FCA has been approached for comment.