The Financial Conduct Authority has asked advisers to explain how they intend to obtain professional indemnity insurance in line with the increased compensation limit for the Financial Ombudsman Service.
Effective from today (April 1) the ombudsman's award limit will rise from £150,000 to £350,000 but the increase has been met with industry concern that advisers will struggle to find PI insurance as insurers are not yet offering the full cover amount.
In an email sent to advisers on Friday (March 29) the FCA asked those whose PI insurance policy does not provide compliant cover to complete an online survey within five working days and tell the regulator how they intend to obtain sufficient cover.
The regulator warned personal investment firms must take out PI insurance which provides cover for ombudsman service awards made against the company.
The regulator told advisers it would review their plans alongside "other information" it holds on the company, stating it would be in contact with any concerns or questions.
The email read: "In the meantime, you should urgently progress your plans to obtain compliant cover and let us know when you have done this via your dedicated supervisor. If you do not have a dedicated supervisor, you should let the FCA firm contact centre know.
"We recognise that some firms may be in a position where they need to obtain different PI insurance following the increase.
"We may be prepared to allow firms who follow the steps set out above time to make these arrangements."
The regulator said it expects insurers to "deal fairly" with companies searching for compliant PI cover.
Last week insurer Liberty, whose cover currently remains at £150,000 for ombudsman decisions, confirmed it was awaiting further information from the FCA before acting further.
A PI broker told FT Adviser he had seen similar responses from other insurers.
In its email on Friday night the FCA told advisers who hold PI insurance which provides full cover for the increased Fos award limits they need not take any further action.
rachel.addison@ft.com
