FSCS slashes levy hike

The Financial Services Compensation Scheme has slashed its levy on brokers for 2011/12.

The FSCS’ final budget shows that it has cut its general insurance intermediary levy for the upcoming year from £93.5m to £69.5m.

This figure represents a substantial increase on the £60m sum brokers are expected to pay this year, but it is a lot less steep than the 50% plus rise proposed in February’s draft.

The FSCS said the levy is being scaled back because it has downgraded its assumption about the number of claims it expects to receive against general insurance intermediaries. Instead of 20,000 claims, it expects to have to pay out on 13,400 next year.

It says: “Following general trends in the market, volumes of PPI claims are continuing to increase significantly.

Despite this, we have revised our “most likely” claims assumptions downwards from the 20,000 announced in the Plan and Budget.

We now expect new claims to be around 13,400 in 2011/12. This is based on our current experience of claims volumes, which suggests the increase is less steep than previously assumed.”

FSCS chief executive, Mark Neale, said: “We are pleased to announce a levy that is £23m less than originally projected, firms and trade bodies have emphasised to us the impact our levies have on the businesses that must pay them.

"In particular, we are mindful of the fact that, in addition to this levy, investment.”

“I want to assure all of our levy payers that we only raise funds that we expect to require and that we pursue recoveries against third parties whenever it is reasonably possible and cost effective for us to do so.

"These recoveries will be used to help offset the costs of compensating consumers when firms fail.”