FSCS mulls raising levies on brokers using unrated

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Exclusive: Brokers that continue to use unrated capacity, despite the collapse of insurers like Alpha and Gable, could pay higher levies to the Financial Services Compensation Scheme next year.

The CEO of the Financial Services Guarantee Scheme, Mark Neale, told Post he remained “sympathetic” to the idea of risk-based levies in the wake of the Alpha collapse.

The statement comes amid concern that brokers affected by the collapse of unrated Danish insurer Alpha were shifting affected business to another unrated Danish insurer, Gefion.

The Financial Conduct Authority consultation on reforms to FSCS funding in May, suggested that risk-based levies were still on the table. Any changes to funding will be announced by the FCA in Q2 next year.

Neale said: “The issue of risk-based levies remains a live one. I have always been sympathetic on incorporating risk into our levies because I think it is right to send that incentive to the industry.

“The greater the risk of your business, then the higher the levy you will pay to the FSCS. That principle is well established in other parts of the industry. That’s the way the Pension Protection Fund works, for example. I’m certainly interested on whether we can incorporate risk into our levying.”

Unrated insurer Alpha plunged into liquidation in March. It blamed its collapse on the failure of New Zealand-based CBL, which it relied on for reinsurance.

The FSCS paid out £405m in compensation in the year 2017-2018. Neale declined to say whether the said numbers for the current financial year would be announced in the coming weeks.

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