FSA audit waiver in relation to general insurance broking

Small companies which undertake mortgage and general insurance intermediation are no longer required to appoint a statutory auditor and will benefit from a rule waiver offered by the Financial Services Authority (FSA). This removes the requirement that they include only audited figures within the reserves reported in their regulatory returns.

The rule waiver comes after the Department for Trade and Industry announced it will, from 5 September 2005, amend the Companies Act 1985 to enable small mortgage and general insurance intermediary firms to take advantage of the small company exemption from having a statutory audit. This broadly includes companies carrying on only mortgage and/or general insurance mediation business with a turnover of under £5.6 million.

As a result the FSA is offering a waiver to firms not required to appoint a statutory auditor from the requirements that only audited reserves may be included in regulatory capital as reported in their regulatory returns. They will in future be allowed to include unaudited reserves. This is against the background of the FSA's plan, announced last month, to consult later this year on permanently removing the requirement for these small firms to include only audited reserves.

In reaching its decision the FSA has concluded that the statutory tests in section 148 of the Financial Services and Markets Act 2000 have been met. Specifically, it considers that there is no undue risk to consumers in removing the FSA audit requirement for small mortgage and general insurance companies when the general law does not require one.