Following months of lobbying, the British Insurance Brokers’ Association (BIBA) has received confirmation from the Financial Services Authority (FSA) that a review of the financial services compensation scheme (FSCS) will be carried out.
The review, which was confirmed following a meeting last week between BIBA and the FSA, is the result of ongoing lobbying from BIBA, who challenged that the broker funding and fees for the FSCS are unfair and do not properly reflect the low risk nature of general insurance intermediation.
Eric Galbraith, BIBA Chief Executive, said: “I am delighted that a review has been confirmed. We have been calling for changes to the funding of the FSCS and the way in which costs are allocated to various classes of regulated activity. It is madness that brokers are potentially expected to fund compensation in the event of big banking failures such as Bradford and Bingley and I hope that this review will address this important issue.”
Steve White, BIBA Head of Compliance and Training, added: “We are unsure of the timescale of the review but this is a huge step in the right direction to protect our members. I will be inputting as much as possible into the review to ensure that the low risk nature of members’ business is fully represented.”
The FSA confirmed that the review would include the funding model – the composition of classes and sub-classes, the annual thresholds each class can be asked to pay, the allocation of levies among different types of firms, and the limits that apply to different types of FSCS levy. They will also look at the method of apportionment of levies to individual firms, including considering the case for risk based levies, and the treatment of both new entrants to the industry and those firms leaving the industry.