Risk managers escape FSA insurance regulation

An estimated 300,000 people no longer face regulation by the Financial Services Authority following a long-awaited decision by the City regulator about the implementation of a European directive.

The Association of Insurance and Risk Managers (Airmic) had warned that if the FSA had not decided that people who buy insurance for companies would not fall under its remit, as many as 300,000 individuals and firms could have needed to receive authorisation from the FSA.

While Airmic admits that the 300,000 is a rough guess, its executive director, David Gamble, believes that "many thousands" of people could have faced regulation from the FSA, perhaps without realising it.

Airmic lobbied the FSA on behalf of its 1,000 members to avoid the regulation and had commissioned a survey which found that one in seven companies would have considered transferring its risk management function overseas if the regulation had been enforced.

"This is excellent news for UK companies, who would have been put at a competitive disadvantage if risk managers had been regulated," Mr Gamble said.

The FSA admitted that the insurance mediation directive had raised some "thorny issues" over the position of individuals and firms which buy insurance for their companies.

It took the decision to exclude them after receiving legal opinion, commissioned by Airmic from Tom Sharpe QC. Airmic believes that some of its members may have already begun the process of applying for authorisation and the FSA has promised to refund any costs.

The FSA concluded that these firms and individuals did not fall under the scope of the director because they did not receive a fee or commission for their work. As it is, the FSA is expecting to regulate up to 20,000 individuals and businesses as a result of the insurance mediation directive which requires the City regulator to oversee individuals who previously were outside its remit, such as vets and car dealers selling insurance.

The FSA said that implementing the insurance mediation directive from January next year, as well as new regulations for mortgage firms which take effect from October, is the largest exercise of its kind ever undertaken by a UK financial regulator.

More than 12,000 firms have applied for authorisation under the two new areas of regulation, the FSA said.