Some UK wholesale insurance brokers use contracts to restrict market competition and do not properly manage conflicts of interest, an investigation has found.

However, the Financial Conduct Authority (FCA) closed its study of competition in the sector early after failing to find evidence of significant harm – the first time it has done this.

Some clauses in broker-insurer contracts seek to limit how insurers engage with other brokers, but this is not a market issue and is restricted to a small number of brokers, which the FCA will investigate.

And a growing number of brokers are getting paid more from placing risks into their own facilities or managing general agents rather than the open market. This can encourage a broker to act against a client’s best interests, the regulator says.

Effective conflict-of-interest policies could reduce the possibility of harm, but some groups have not fully identified conflicts, it warns.

The regulator says while there is room for improvement, intrusive remedies are not needed and issues uncovered will be addressed through the usual supervisory processes.

The FCA continues to monitor the market, to assess the impact of Brexit and any changes in business models or industry consolidation.

British Insurance Brokers’ Association CEO Steve White says the “unprecedented” early closing of the investigation proves the wholesale market is highly competitive.