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Proposed FSCS cap rise ‘concerns’ BIBA

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30/07/2012
Insurance brokers have raised concerns about Financial Services Authority (FSA) plans to increase their compensation threshold under the Financial Services Compensation Scheme (FSCS).

The regulator put forward the change as part of its consultation on reforming the way the FSCS is funded.

Under the proposals, the threshold for the general insurance intermediation sub-class, which comprises more than 13,000 businesses, would be increased from its current level of £195m to £300m.

The threshold, set annually, refers to the maximum amount that can be levied on businesses within a sub-class in any given year.

Firms are categorised in sub-classes depending on the activities they undertake and the money collected is used to meet compensation claims from consumers.

If the proposals are agreed, there would also be a threshold increase for the investment intermediation sub-class, which contains some 7,000 advisory firms, from £100m to £150m.

Steve White, head of compliance at BIBA, said: “We are very concerned that the financial cap on our sub-class is being raised by 50% to £300m.

“Our consultants will be closely studying the accompanying economic study of affordability [provided by Deloitte].”

BIBA also said it was concerned by plans to create a retail pool for the classes the FSA expects to be subject to the Financial Conduct Authority’s (FCA’s) funding rules.

The pool would not include the forecasted contributions of companies the FSA believes will fall instead under the Prudential Regulation Authority (PRA), such as banks.

White said: “[It] could have serious consequences for our members if significant failures occur elsewhere in the funding scheme.”

BIBA chief executive Eric Galbraith said: “[We], together with our lawyers and consultants, remain engaged in helping us find a more equitable long term solution for insurance brokers. It will not be easy but all options must be considered.”

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