Final rules 'fudge' lets insurers off the hook

The Financial Services Authority's indecision over the final rules on risk transfer and the handling of client monies has created needless strife for brokers. Now the relatively simple task of formalising the common market practice of insurers taking responsibility for client money through agency agreements has been fudged.

Although the FSA eventually realised the rules as they stood were unworkable, it was by then too late do anything about it prior to the final rules being published. This missed opportunity has resulted in a situation where insurers have no incentive to allow the historic status quo to be ratified.

As it stands, their liability in the event of a broker's collapse has been absolved.

Insurers will, no doubt, come round but only on a broker-by-broker basis.

For many, this situation, which the FSA has effectively left the market to resolve by itself, will remain unclear.

Insurers must get off the fence and stand by a practice that has been accepted for more than 200 years. If not, the fragmented status that different agencies will end up with will not provide any workable regulatory way forward.

Paul Meehan, Smart & Cook.