The SRA has this week published the feedback which was received over the consultation over its Financial Protection policy. This consultation ran for 12 weeks and ended on January 17.
The consultation looked at the proposed changes as part of the April 2011 Policy Statement. Comments made by stakeholders, along with the SRA responses have now been published and are available here
The main changes covered in the consultation were:
– The closure of the Assigned Risks Pool (ARP) as a provider of policies of qualifying insurance from 30 September 2013 (excepting continuing run-off cover started before that date)
– A requirement that from October 2012 all policies of qualifying insurance include provision for an extension of the policy for 90 days if the insured firm has not taken out a new policy of qualifying insurance
– Changes to Authorisation Rules to control the work that may be undertaken by firms during the 90 day extension, and to remove authorisation at the end of the 90 days if no policy of qualifying insurance is obtained
– Provisions for the funding of the ARP in 2012/13 to be provided by both the regulated community and the qualifying insurers
– Provisions to move responsibility for making payments in respect of uninsured firms from the ARP to the Compensation Fund in 2012-13
Antony Townsend, SRA Chief Executive said of the consultation:
“We’re grateful for the responses we received from all respondents. Getting a wide range of views on our proposals enables us to make sure that what we’re doing is the best way for us to develop our policy.”
Some of those who responded commented that there should be changes to the way that the indemnity liabilities would be covered to reduce the exposure of the profession. The SRA response to this suggestion is that maintaining the current arrangements will de-stabilise the market less.
Concerns were raised about the ability of the Compensation Fund to meet all client protection matters if the arrangement to cover non-insured firms was withdrawn. The SRA argues that the Qualified Insurers have no responsibility for firms which they do not cover, and that maintaining an arrangement like this requires similar resources to the ARP.
The SRA has withdrawn the proposal on the notice of intention not to renew cover, after agreeing with respondents that this could interfere with the market. As well as this, the SRA has also agreed with respondents requests to publish the credit ratings of insurers.
Antony Townsend commented of the SRA responses:
"As a public interest regulator, our objective is always to ensure that we have a comprehensive set of arrangements to protect clients through compulsory PII and the Compensation Fund. This was our only consideration when drawing up our responses to the comments made."
The changes to the Qualifying Insurer’s Agreement and to the rules within the Client Protection section of the SRA handbook will be approved by the SRA Board when it meets on 16 May. The proposed date for implementation of the changes is in October 2012.
The SRA aims that the changes ensure that the open-market system of PII is sustainable, and competitive.
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