Professional indemnity insurer Liberty is to meet with the Financial Conduct Authority to discuss the increased compensation limit for the Financial Ombudsman Service.
Yesterday (April 1) the ombudsman's award limit rose from £150,000 to £350,000, but the increase has been met with concern that advisers will struggle to find PI insurance as insurers were slow to match the maximum cover in their policies.
Liberty told FTAdviser it is scheduled to meet both the FCA and Fos after requesting further clarification on the changes, following which it expects to be in a position to "assess any required alterations" to its policies.
The insurer also said it has implemented an "interim measure" while it assesses the regulator's changes, which means current policyholders will be covered for the full £350,000 in the event of an award under the Fos.
However, this interim measure will not apply to any defined benefit pension transfers transacted after April 1 - which the insurer said would need to be underwritten on an individual basis.
A Liberty spokesperson said: "In view of the tight timescales involved from the policy statement being released and an implementation date of April 1, there is now a gap in cover that did not exist when the policy originally incepted.
"This was not our intention and is not a situation that we would want our policyholders to be in, therefore we have implemented an interim measure while we assess the changes and their implications, and amend our policies appropriately.
"We are pleased to confirm that our policies currently in force will provide a full indemnity for any Fos awards up to the new limits specified in the regulator's policy statement, subject to policy terms and conditions.
"However, this amended cover shall not apply to any DB pension transfers transacted after April 1, which will need to be underwritten on an individual basis."
A PI broker told FTAdviser he knows of three other PI insurers who have also increased their cover to £350,000, but were not including DB transfers.
The changes came after at the end of last week the FCA emailed advisers warning those without compliant PI cover had five working days to tell the regulator how they intend to obtain sufficient cover.
The regulator stated it expects insurers to "deal fairly" with companies searching for compliant PI cover.
Following the events of recent weeks calls have also been made for the regulator to intervene in the PI insurance market, for the good of "advisers, clients and the sector" as a whole.
Tobias Haynes, a solicitor at FS Legal, said the FCA must do "much more" to control and regulate the PI insurance market.
He said: "Solicitors have stringent rules stipulating minimum cover for PI insurance.
"The FCA should do much more to mandate a minimum level of cover for all firms and to require that all PI insurers who partake in providing such cover, must provide for the minimum."
The regulator expects advice firms to be covered for potential claims either through PI insurance or adequate capital buffers.
In other markets regulation of this issue are more stringent.
The Solicitors Regulation Authority for instance has an agreement in place which insurers must sign if they wish to insure solicitors in England and Wales, whereby signatories agree to offer PI insurance policies which meet the minimum terms and conditions set by the SRA.
However, others disagree with more FCA involvement, saying it could be counterproductive.
A PI broker, who does not want to be named, told FTAdviser that forcing insurers to provide a certain level of cover could have unintended consequences such as premium increases or providers withdrawing from the market.
Both the Prudential Regulation Authority and the FCA regulate the insurance market, but it is the latter who is responsible for regulating how insurers behave.
Philippa Hann, partner at Clarke Willmott LLP, said very few people would disagree the issue of PI insurance in the financial sector is a "major problem".
She said: "This is no reflection of the excellent work and advice given by the vast majority of advisers but mistakes happen and, as the British Steel debacle has shown, there are pockets of problems.
"As I see them, the main areas of concern relate to the way in which the insurance policies are drafted; the aggregation of complaints, meaning that the limit of indemnity for each claim is reduced by the arrival of a new claim, the woeful minimum level of insurance and the fact that insurers are able to exclude liability for the very claims for which the insurance is needed.
"This all leads to the 'good' advisers paying ever increasing levies to the Financial Services Compensation Scheme and a lack of trust in the sector."
Ms Hann said an overhaul of the insurance requirements in the financial sector was needed.
She said: "It ought not to be possible for advisers to find themselves uninsured because the insurer has chosen to exclude certain advice from future claims.
"This must be solved for the good of advisers, clients and the sector as a whole."
The FCA declined to comment on the suggestion it should intervene in the PI insurance market.
rachel.addison@ft.com
