Professional indemnity insurance (PII) experts have questioned the FSA's view that its redress scheme for Arch Cru investors will have no impact upon the future availability of cover for IFAs.
Earlier this week, the FSA announced that, under plans being consulted on, advisers will have to hand over around £110m back to clients for mis-selling them the funds.
In the consultation document, it said: "We have considered the impact on the availability of professional indemnity insurance (PII).
"We do not consider that our proposals will have a significant impact on the future availability of PII in general, but we will revise this assessment in the light of any evidence received."
However, Neil Pointon (pictured), director of retail at Howden Insurance Brokers, says the proposals will almost certainly lead to a further hardening of the market, making it more difficult and expensive for advisers to get the coverage they need.
"There's no doubt that this will have some sort of impact and it's just a question of how far it will go," he said. "This will not be received well by the PII community."
Richard Turnbull, head of underwriting at Collegiate, agreed that the proposals could cause similar problems to those seen in 2002/3, when many firms struggled to find adequate cover.
"Why they think history won't repeat itself is a mystery as insurers are already running for cover and this sort of behaviour is bound to create an unstable market," he said.
Insurers have already been under pressure recently as a result of the mounting costs set to emanate from compensation related to the mis-selling of Keydata products.
Chubb recently became the latest provider to pull out of the market, citing rising costs.
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