PI insurance is a mandatory requirement for IFAs operating from most countries including the UK, Europe, Singapore, Hong Kong and the UAE. But a number of IFA firms have reported struggling to get the right cover for their business, with some even facing the prospect of temporarily ceasing trading.
A recent IA poll found that 37% of readers had experienced problems renewing their PI cover last year, with a further 28% saying that while they had not, they are aware of firms which had.
The problem is now so commonplace that the Federation of European Independent Financial Advisers (FEIFA) recently contacted all of its 34 member companies, which have around 350 individual IFAs, to warn them they may face difficulties renewing their PI cover.
FEIFA chief executive Paul Stanfield said the trade association had become aware that the widely reported problem of renewing PI in the UK had started to spread into the international market, and so decided to communicate this to forewarn FEIFA members.
Stanfield said the association had been working with a few members who had been having difficulties and was aware of some firms which had become concerned they were going to run out of cover and may have to temporarily cease trading.
“I would urge advisers to look into their renewal as early as possible and give themselves a number of options, and not necessarily assume their current insurer will automatically renew for them,” he said.
Advisers elsewhere have also reported issues obtaining PI cover.
Mark Rawson, chief executive of The Henley Group, a Hong Kong-based adviser, said it was difficult for advisers not just to obtain cover, but for that cover to extend to all of their activities.
“Most plans cover the activity of insurance but don’t extend to investment, pension advice and so on, and the investment management/advisory covers don’t come back into the insurance domain,” he said.
David Bellingham, chief executive of Singapore based Professional Investment Advisory Services, said the problem has not yet noticeably arisen in his jurisdiction but that “it may be something that emerges as more of an issue as regulations evolve if the insurers feel the more transparent regulatory framework may lead to a more litigious marketplace”.
