UK's Constructors Up In Arms Over EU Directive

by Robin Pilgrim, LawAndTax-News.com, London

13 April 2004

The UK's RICS (Royal Institution of Chartered Surveyors) is objecting violently to the Government's intention to make construction industry insurance intermediaries register with the FSA (Financial Services Authority) under the EU Insurance Intermediary Directory, which in broad terms obliges Member States to regulate such intermediaries.

Says the Government: All insurance and reinsurance intermediaries must be registered with a competent authority in their home Member State. Insurance undertakings and other bodies may collaborate with the competent authorities in registering intermediaries. The register must specify the names of the natural persons in the management who are responsible for the mediation business. By making insurance and reinsurance mediation a regulated activity, all firms (unless exempt or
persons to whom section 19 FSMA does not apply) must obtain authorisation from the FSA to carry on such activities.

RICS says: 'The proposals to impose FSA Regulations across the entire insurance market is a knee-jerk reaction demanding a "one size fits all" solution in areas of
the market where regulation is inappropriate or simply not needed. Construction related insurance is a complex, specialised subject requiring a full understanding of how the construction industry works and a detailed knowledge of the various Standard Forms of Contract. Advice in this area is best provided by those who work on a day-to-day business with the organisations involved and who have the appropriate knowledge and training.

'Chartered Surveyors and other professionals working within the construction industry will be faced with the prohibitive cost and additional time required to comply with the proposed FSA Regulations. Such advisors will either simply "opt out" of providing such professional advice or alternatively pass the additional cost on to clients in the form of extra fees. The whole issue as it affects the construction industry is counter-productive. The very people the Regulations are designed to protect
will be denied the opportunity to obtain the best possible advice from those in a position to provide it or will have to pay more fees for the advice they get.'

RICS has written to the Chancellor, Gordon Brown, to protest, saying:

'In our view the way that this directive is being implemented is one of the worst examples we have ever seen of a sledgehammer being applied to crack a nut. A great amount of regulation, which will be both costly and cumbersome to implement, is being applied to tackle what appears to us to be a largely non-existent problem. We do not consider that there is any significant problem in the UK relating to the operation of insurance in the property and construction spheres nor do we feel that the Directive necessitates the kind of 'platinum-plating' that the UK Government seems determined to give it. We simply do not understand why the UK Government has decided to go far beyond what was strictly necessary and apply this directive in ways that other countries do not appear to feel necessary. The net result is likely to be a withdrawal of smaller firms from areas like property management, something which is presumably not the Government's objective.'

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