Goodwill dominates panel discussions

Goodwill, which will no longer be allowed as an asset in the regulatory capital requirement and resource calculation, was a hot topic at the PB Roadshow panel discussions.

The change, due to come into force on 14 January, lead representatives of smaller brokers at the roadshow to question why larger acquisitive brokers were being allowed to "hide" goodwill assets in a holding company.

The issue of goodwill continually raised its head during the debates, chaired by Peter Staddon, head of technical services at the British Insurance Brokers' Association, with emphasis being placed on the Financial Services Authority and its treatment of small brokers on the issue.

Chris Harris, one of the FSA's managers for its small firms division, attempted to explain the matter: "Under a European directive we can consolidate those accounts and that then becomes a capital adequacy issue, allowing you to move it around. However, if the whole group cannot support it then you have a deficiency and we'd seek remedial action."

Other issues up for debate included Axa's recent purchase of commercial brokers. Asked whether these brokers should simply become tied agents, Chris Caunce, director of Manchester-based broker Caunce O'Hara, suggested that a hard market would "wash out" any chance of tied agents forming. Harris was more cautious, suggesting that if the UK was to follow the European broking model, customers would need to be better informed about what being a tied agent means.

WHO SAID WHAT

Richard Heighton, director at Lucas Fettes & Partners, said he had no worries about the threats from the banks or direct insurers and was concerned only about keeping up with technological changes.

Simon Burtwell, director of insurance at Ernst & Young, said: "What is the industry doing to let the customer know that if they go to a broker it will be different; a better alternative. At the moment we are not doing anything like enough."