Insolvency Exclusions

The Financial Conduct Authority (FCA) has been conducting a review of the operation of the Financial Services Compensation Scheme (FSCS), seeking views as to how to reduce the number and value of claims falling to the FSCS and assessing how the scheme is funded, including the impact of professional indemnity insurance (PII).

On 1 May 2018, the FCA (in CP18/11) published its responses to its previous consultation (CP17/36), which had included the question:

Do you have any views on our proposal to prevent personal investment firms (PIFs) from buying PII policies which exclude claims when the policyholder or a related party is insolvent?

The proposed change is "to ensure that more consumer claims are paid by insurers which could help to reduce the cost of the FSCS to other firms." There is a prohibition on the use of insolvency exclusions in PII for other professions: for example solicitors and accountants and the FCA's concern is that an otherwise covered claim...