AIRMIC welcomed the recent statement from the Financial Services Authority (FSA) that group risk managers should escape regulation when the Insurance Mediation Directive comes into force in January 2005.
The opinion, which came in a letter from the FSA, means that most risk managers will not have to apply for authorisation in order to buy insurance for companies within their group.
In the face of continuing uncertainty over whether risk managers in the UK, alone among EU countries, would be caught by a piece of regulation designed to create a level playing field for insurance intermediaries, AIRMIC assisted its members in a number of ways. One of these was to obtain an opinion from Thomas Sharpe QC which was circulated to members, the FSA and the Treasury.
The FSA accepted the main thrust of Sharpe's opinion, which said, 'The UK, by including group risk management companies within the scope of the Financial Services and Markets Act (FSMA) 2000 regulations on insurance mediation, has not properly incorporated the directive into English law' The FSA has also indicated it is willing to refund any fees for those who now wish to withdraw their request for authorisation.
"This is excellent news for UK companies, who would have been put at a competitive disadvantage if risk managers had been regulated," said AIRMIC executive director David Gamble. "We are grateful to the FSA for their flexible and constructive approach."
To AIRMIC's disappointment, however, the Treasury has declined to grant risk managers automatic exemption from regulation. The Treasury has accepted the FSA's approach, but AIRMIC feels that there is still an element of unwelcome uncertainty. It will continue to work with the FSA to clarify the precise position of risk managers.
The FSA have also accepted the principle that risk managers who buy insurance on behalf of their group and then seek to recoup the administration costs from other companies in the group are not receiving remuneration for doing so.
AIRMIC's annual conference in June was extended by an hour to enable special discussion of the FSA and the question of whether or not risk managers should apply to be authorised. Outgoing AIRMIC chairman Nick Chown commented: "Everyone, including the FSA and Treasury, agrees that regulating risk managers would serve no public interest."
AIRMIC feels that there may be other organisations, including small and medium sized companies, that could benefit from the same legal arguments.
With that in mind, it is happy to share its legal opinion with other interested parties. It notes that the FSA is willing to refund any fees for those who now wish to withdraw their request for authorisation.
