Revamp of compo plan urged by brokers

THE Professional Insurance Brokers Association (PIBA) has called for the revamp of the funding structure of the investor compensation company (ICCL).

The PIBA, the largest organisation representing small brokers, is calling for the funding structure of the ICCL, which compensates shareholders for certain losses, to be restructured to ensure that brokers pay according to the size of their company.

It said yesterday that it was unfair that small brokerage firms pay the same amounts as large companies.

“At present, PIBA members and other small brokers are, in effect, subsidising larger brokers when it comes to the compensation fund,” said John Hogan, chairman of the PIBA’s legislation committee.

He said the vast majority of PIBA member are made up of brokers employing one to three people and that the current system of funding is damaging their businesses.

“The scheme, as currently operated, is anti-competitive and anti-business, favouring the larger operators in the market and discriminating against the small operator who possess less risk to the fund.

In particular, the situation of unlimited liability to all contributors is placing our member at huge risk and would give us grave concerns about the future funding of the fund,” Mr Hogan added.

It has told the ICCL that the PIBA wants a graded scale of contributions based on levels of turnover, and a limit on liability for PIBA members.

The ICCL was set up in 1998 to provide compensation to customers who had entrusted money or investments to an investment firm to be compensated for certain losses in broadly comparable terms to a depositor with a bank or building society.

The maximum level compensation the ICCL can pay out to an individual is €20,000 or 90% of the losses, whichever is the lesser of the two.

The ICCL is funded by contributions from brokers and firms authorised to conduct investment services.