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LONDON The United Kingdom's insurance regulator has written to the chief executive officers of all insurance intermediaries stressing that they must disclose to commercial insurance buyers details of commissions paid on their business if the buyer requests such information.
The London-based Financial Services Authority said "we expect all firms to disclose commission to commercial clients on request."
FSA rules require brokers to disclose to commercial buyers of insurance the details of any commissions earned on the placement of their business should the client ask.
In addition, the FSA said that boards at insurance brokers should ensure there are systems and controls in place to respond to a commercial client's request for information.
The FSA announced in October that it was undertaking a review of transparency of commission payments.
In the letter to CEOs, Hector Sants, managing director, wholesale and institutional markets at the FSA, said that if this "market failure" analysis, and a corresponding cost benefit analysis, show that the benefits of mandating commission disclosure outweigh the costs and if an industry-led solution has not yet been found the FSA will "consider whether regulatory intervention is the best way forward".
The issue of broker transparency came to the fore in the United States when outgoing New York Attorney General Eliot Spitzer undertook a wide-ranging investigation into insurance broking practices.
In the wake of that investigation, and subsequent probes by other regulators, many large brokers ceased accepting so-called contingent commissions.