The Financial Conduct Authority (FCA) has rejected calls from smaller financial firms for it to intervene in the professional indemnity insurance (PII) market.
The regulator dismissed pleas from two of its engagement panels on the matter, noting that it did not consider a regulatory intervention appropriate.
Both the Smaller Business Practitioner Panel and Consumer Panel raised concerns with the FCA around inadequate and expensive PII cover, which they said meant smaller businesses either cannot get PII at all or cannot get it at an acceptable cost.
These businesses may also be facing challenges to their ability to continue trading, which in turn has an impact on consumer choice, they added.
Cyclical changes in capacity
However the FCA was not swayed by the panels’ arguments, noting it had undertaken extensive research on PII using publicly available sources and engaged with various stakeholders in the PII market, including members of the panels.
“This has deepened our understanding of the impact of cyclical changes in capacity in the PII market,” it said in response to the panels.
“However, following our evidence-based analysis, we do not currently consider a regulatory intervention appropriate, due to the nature of the supply-side issues affecting the PII market.
“This means we currently have no plan to conduct further discovery work. We are monitoring the situation, but at this point in the cycle we are not undertaking any proactive work,” it added.
The regulator also noted that where policy developments might affect the supply or demand for PII, it proactively engages with firms and trade bodies, such as consultation for personal investment firms, which proposed a new capital deduction for redress.
“These proposals aim to improve personal investment firms’ financial risk management, and we expect that in the longer term this will make it an easier market for PII providers to operate in.”
This consultation includes a specific question on PII, it added.