A question that a broker must ask, whatever the categorisation of an insurance market, is who are we doing business with? The FCA principles refer to this; firms are required to recognise and manage the risks that face businesses. The FCA expects all authorised firms to take due skill, care and diligence when a new or previously unused counterparty is identified for collaboration.
A misconception has often been that these principles pertain mainly to Insurers and risk carriers. However, as the overarching aim of the principles are to protect the end customer, brokers also have an obligation to carry out due diligence on those with whom they arrange policies, including managing general agents (MGAs) and wholesale brokers.