Wealth and other financial sector advisors enjoy a broadly stable market for professional indemnity insurance, but there are also shortcomings, a report says.

Financial advisors in Australia enjoy a generally stable market for professional indemnity insurance but gaps exist between what regulators expect and what is available, a report says.

A report by the Australian Securities and Investments Commission, the country’s financial watchdog, said that while the market for such insurance is “basically sound”, its review found some policies do not come up to the minimum standards it has set out.

The review was carried out in response to Australian Financial Services licensee concerns about securing PI insurance and the high level of unpaid external dispute resolution scheme determinations, ASIC said yesterday.

“Advice businesses must have adequate PI insurance, and they should make sure this cover measures up with our requirements in RG 126 [regulatory guide]. ASIC will follow up with surveillance of advice licensees' PI insurance and if we find problems we will take enforcement action,” ASIC's deputy chairman, Peter Kell, said.

The regulator reviewed the market in a period from November 2014 to June this year to get a clearer idea of how much PI insurance costs, and how widely available it is.

The report tests concerns ASIC has heard from some advice licensees over the past few years that they have been unable to secure PI insurance at a reasonable cost. It lays out whether the insurance that is available meets its guidance on adequate PI insurance, such as if there are any significant deficiencies in the PI insurance that is generally available to advice licensees.