Bradstock serves as warning

The news this week that Alternative Investment Market-listed Lloyd's broker Bradstock had ceased trading because of its failure to find affordable professional indemnity cover has certainly raised some eyebrows across the sector. The industry has already seen the independent financial adviser market blighted by a lack of cover, but it had been thought that general insurance brokers were, on the whole, less risky and that it was unlikely the problem would be replicated in that market.

However, with the advent of Financial Services Authority regulation and the new PI requirements that come with it, there had been speculation that some brokers might be hit by similar problems to IFAs.

Bradstock's plight could awaken the call for an assigned risks pool for brokers in the same way that has happened with the solicitor market. In that sector, those failing to get insurance in the open market are allowed two years' grace to get the insurance before they must cease trading.

Alternatively some like-minded brokers may look to set up their own mutual for PI cover. In the IFA market, the PI Direct-backed Magian Mutual had its FSA application fast-tracked because of worries over capacity for these intermediaries.

But for most brokers, it should not come to this and Bradstock will end up being the exception rather than the rule. Instead, the company's predicament should focus other brokers' minds on adopting good risk management practice and assessments of their own businesses to show insurers they are a good risk.