Overview and the law: insurers for IPT purposes: pools of insurers or ‘co-insurance’
Co-insurance is a system by which the risk(s) covered by one insurance policy are shared between a number of insurers. Each insurer accepts a portion of the risk(s) and receives a percentage of the premium corresponding to the portion of the risk they are covering. Sometimes insurers interested in a particular type of insurance set up as a pool of insurers or an underwriting pool. They may also set up an underwriting agency to handle their co-insurance business. The relationship between the agency, the individual members of a pool or group, and the insured will help to determine who the insurer is for IPT purposes. For example, the agency itself may employ its own staff, may be authorised by the FCA as an underwriter and it may agree to provide cover and assume the risk on behalf of the group of insurers as a whole. If the agency rather than the members is found to be insurer then it must account for IPT. However, these arrangements do vary and it is possible that while the agency may undertake to provide cover on behalf of the group, the premium is due to the individual members and each is contractually bound to provide insurance under the policy agreed by the agency. In those circumstances each member is responsible for accounting for IPT on the proportion of the premium that they receive, rather than the agency.