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FSA hints at get tough approach to PSAs

The UK regulator Financial Services Authority has hinted that it may take a more robust approach over broker commissions in the light of Eliot Spitzer’s allegations against Marsh last week.

Last year, the FSA swerved the issue of over-rider payments in its consultation paper CP 187 which did not propose requiring intermediaries to disclose inducements they receive from insurers. Instead, the FSA largely proposed to maintain the status quo managed by the General Insurance Standards Council (GISC) which stipulates that a broker must only disclose these arrangements if asked by its clients.

However, the FSA’s head of insurance David Strachan – speaking at a London conference today (18 October 2004) - is reported on the Reuters newswire as saying that he is “looking at what is developing in the US from this investigation”.

He refused to comment, however, on whether the FSA would initiate a similar enquiry when it takes over regulation from GISC next year. Strachan was speaking at the Institute of Economic Affairs conference on “The Future of General Insurance” in London.

Last year, an FSA spokeswoman told Insider Week’s sister publication IQ that the regulator was looking at “unfair inducements rule that would cover things like volume overrides”. Lloyd’s also confirmed that it was reviewing the practice when Spitzer revealed in April that he had issued subpoenas against the three global brokers, Marsh, Aon and Willis, over the use of Placement Service Agreements.

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