The professional indemnity (PI) insurance squeeze for financial planners shows no signs of abating, as combined factors continue to make underwriters wary of the risks.

Strathearn Insurance Brokers Professional Services Division Manager Stephen Hughes agrees that a surge in global financial crisis-related claim notifications from planners is making insurers hesitant to quote.

He says underwriters are also wary of exposure to collapsed funds and issues such as margin lending.

They are also concerned about the Financial Ombudsman Service’s proposed terms of reference that do not allow appeal rights against rulings.

“The PI market for financial planners has never been a huge one,” Mr Hughes told insuranceNEWS.com.au.

“The reinsurers don’t want to be as exposed on financial planner portfolios as they currently are, so a number of insurers that used to provide limits of up to $20 million for a particular risk may now be able to quote up to $10 million and other insurers may only be able to quote up to $5 million for new risks.

“This has implications for the larger groups that need $20 million to satisfy their RG126 requirements.”

“You might need to get two or three insurers involved to provide cover for the client.”

Mr Hughes says rates vary widely, with increases of between 25% and 80% being experienced, depending on the risk profile.

“When you break down the cost to the per-adviser level it’s not too bad,” he said. “But certainly the market is harder than it ever has been in my experience.”