Euro strength 'may mean 20% rise in Professional Indemnity (PI) costs' - PI for IFAs

14/1/2009

The continuing strength of the euro may mean that the cost of Professional Indemnity (PI) for independent financial advisers (IFAs) will rise significantly.

Following instructions by the Financial Services Authority (FSA) last year that the minimal cost of PI will rise by 12 per cent to the sterling equivalent of €1.12 million and €1.68 million for 'any one' and 'aggregate' claims respectively from March 1st 2009, FT Adviser claims that as the European currency is now stronger IFAs may face higher costs.

However, Fay Goddard, chief executive of the Personal Finance Society, reminds IFAs of comments from the FSA that when taking out PI it will use the currency level at the point of renewal/inception.

As such, she claims "premiums could increase by more than 20 per cent - depending on when the adviser purchased or renews his insurance - and if professional indemnity premiums stay the same".

Should rates go up, however, Ms Goddard states there will be a "significant hike" in PI costs.

Meanwhile, Andrew Strange, director of policy for the Association of IFAs, urges advisers to ensure that they shop around when searching for PI cover.

However, this is not the first time that predictions of PI rises have been made.

In a recent Insurance Times article, Saxon East claimed that PI premiums for all classes of business renewals could rise by as much as 15 per cent over the course of this year.

Neil Pointon, Chief Executive of Specialist PI broker PYV, commented: "There has been an expectation of rising premiums due, amongst other things, to the current economic turmoil, however, this is largely yet to occur. We have been in this business since 1985 and are confident that our clients will continue to enjoy competitive premiums compared to their peers, whatever the market conditions."

Click here for more information about Professional Indemnity Insurance for IFAs.

Click here for more information on Professional Indemnity Insurance in general.

PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2008 Adfero Ltd.

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