05 November 2004
Some arm's-length management organisations could be forced to stop providing insurance cover to housing tenants from 2005, because of a dispute between the Treasury and the Financial Services Authority.
New regulations, which come into force in January following a European Union directive, require authorisation for all bodies providing financial services, effectively 'licensing' them.
Public Finance reported in June that many public bodies were omitted from a list of those exempt from the law. Others missed an initial authorisation registration date because they did not know they required cover. That could mean they are acting illegally in providing financial services next year.
Exempt bodies include councils and registered social landlords, but not their subsidiaries, such as Almos.
Several Almos that have contacted the FSA and the Treasury about the regulations have received conflicting responses and a test case is now in preparation.
Thousands of Almo tenants receive cheap contents insurance through the bulk purchase of policies. Some Almos have argued for exemption because they provide insurance as a benefit to tenants, and do not make money from the arrangement.
According to letters seen by PF and sent to Hammersmith and Fulham Housing Management Services, the FSA has largely accepted this 'by way of business' argument.
One FSA letter states: 'On the assumption that [the Almo] does not, as a matter of fact, obtain any other form of remuneration, we can see no reason to disagree with the conclusions you have reached on this [exemption].'
But, in its correspondence, the Treasury says: 'An organisation will not be caught by the scope of the directive if it is not remunerated nor does it receive any economic benefit.' Treasury officials have told some Almos that they interpret the receipt of any monies from insurance payments as remuneration.
However, a Treasury spokesman told PF: 'Our correspondence refers to the underlying European directive, but the FSA will interpret exemptions under that directive.'
One senior Almo source said the lack of clarity could discourage insurance firms from working with Almos.
The National Federation of Almos is backing a test case in which Hillingdon Homes will apply to the FSA for outright exemption.
PFnov2004
