The Financial Conduct Authority (FCA) has said that advisers still need to have professional indemnity (PI) insurance policies in place during the Covid-19 outbreak in accordance with its rules.
This comes as advice firms struggle with rising premiums, including some seeing increases of 400%.
The FCA said in a statement on 21 April: “Our position remains that firms need to have PI insurance policies in place in accordance with our rules to support their ability to meet liabilities as they fall due and to protect their consumers.
“We will continue to monitor the impact that coronavirus has on all firms’ operational resilience, including insurers. Where we see evidence that insurers’ ability to process renewals is being affected, we will consider taking action in line with our approach to supervision.
“Where an individual firm has concerns it will be unable to secure appropriate PI insurance cover, including at the point of renewal, it should notify us in their usual way.”
A ‘kick in the guts’ for advisers
As firms start to furlough staff and struggle to make ends meet, PI cover will become a real problem for advisers.
Recently, Portfolio Adviser sister publication International Adviser reported on a tweet by Phil Billingham, director at Perceptive Planning.
On 3 April, he wrote: “Just received our 2020 PII, feel as if I’ve been kicked in the guts. We can pay, have paid, and will survive. But this is not sustainable.”
Billingham added that, after combining payments for the industry levy and PI insurance, the sum equates to what two members of staff would cost.
FCA discussions indicate PI insurance cover remains available
The FCA said in its statement that it recognises that the PI insurance market “is evolving”.
“Some firms may be concerned that the current coronavirus situation may affect their ability to renew PI insurance in a timely manner, impacting their operational resilience,” the UK regulator added.
“We are continuing to assess how insurers have been reviewing their approach to underwriting. And we are aware that they may seek more detailed information to understand the risk of a particular firm.
“We have engaged with the International Underwriting Association (IUA) and have spoken directly with individual insurers and brokers.
“Our discussions indicate that PI insurance cover remains available in the market and the crisis is not preventing insurers from undertaking the renewals process.”
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