Financial Conduct Authority  

Fos limit could see advisers take capital hit

The regulator stressed it does not expect a rise in premiums of this magnitude to materialise but it has now stated it is prepared to give advisers some time to sort out their PI cover come April but will not move on the policy or the date on which it becomes effective.

It stated: "If firms do need to obtain different PI insurance cover and need a short time to obtain this then we will consider their individual circumstances."

But there is a sense insurers are still waiting for guidance from the FCA before they adapt their policies.

A spokesperson for Liberty Speciality Markets said: "We are awaiting further information from the FCA on this rise in the Fos award limit and will consider any appropriate action in light of their guidance." 

Another PI broker told FTAdviser he has seen a similar response from insurers across the market.

Similarly, the Personal Investment Management & Financial Advice Association has urged the City watchdog to postpone the changes to the ombudsman's compensation limit in light of the short implementation period.

Ian Cornwall, director of regulation at Pimfa, said: "Firms must not be penalised because the FCA has failed to allow sufficient time for implementation. The regulator needs to take action very quickly." 

Mr Cornwall said the impact on the PI insurance market was an area of key concern for the industry.

He said: "We are disappointed that in setting an implementation date of April 1, 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." 

But an FCA spokesperson told FTAdviser: "The new award limit will provide further protection for consumers and small businesses and we will not be delaying its implementation.

"We consulted thoroughly before deciding on the new rules and firms have had sufficient time to discuss cover with insurers."