Written binding authority agreements - an FSA debacle

I write in response to the published letter (PB, June 2004) from JG Searle. While agreeing wholeheartedly with Mr Searle's sentiments, I think he slightly misunderstands the current position.

Where a firm has written authority from carriers to bind them, the Financial Services Authority prudential requirements sourcebook, Annexe C, CASS 5.2.1G, 5.2.2G and 5.2.3R applies.

This states that, under such agreements, monies paid to the underwriting agent are considered by the FSA to fall under the 'risk transfer' provisions; however, such binding authorities must, under CASS 5.2.3R, include written agreement by the carrier to this principle.

This is where the problem lies. The Lloyd's market has not yet decided its response and none of the composite companies with which we deal have been prepared to confirm, prior to 31 May, that they would supply the requisite written confirmation. Of course, the FSA, having caused this debacle, is not interested in resolving it.

If such agreement cannot be obtained from the carriers, then Mr Searle is quite correct. This will probably result in the demise of wholesaling binding authorities, with the consequent loss of niche market products to the broking fraternity.

Paul Hudson, Leisureinsure.