Charter HCP has soft launched its assurance policy for the peer-to-peer lending market and has already reported a good level of interest from platforms.
The assurance policy, which will cover the investor for up to 80 per cent of the security backing a loan, was designed to give investors trust and confidence in the market.
P2P veteran Terry Pritchard (pictured), director of Charter HCP, plans on launching the product officially in the middle of March, when he will also be launching a P2P lender.
He said other P2P lenders will be able to use the assurance product, which is also transferable to investments and funding lines.
Charter HCP has been testing the administration of the product and has already had interest from P2P lenders. Pritchard said that around a dozen firms have contacted him directly and another 20 have sent enquiries to the firm’s website.
“The product is built for the marketplace to give some confidence back to clients when they’re investing,” Pritchard said.
“The Financial Services Compensation Scheme (FSCS) doesn’t cover P2P lending right now and won’t do so without a standardised reporting structure.
“I’m trying to give people some confidence when investing their money, so that they won’t see their money invested poorly with no recourse.
“I think it solves a lot of problems. It doesn’t solve everything, but it gives some comfort to the investor that they’re not just taking a massive hit if it goes wrong.”
The assurance bond is a non-payment guarantee bond and there is no maximum pay-out.
Unlike FSCS, for investors to claim on the policy there has to be an insurable event, such as the inability to sell a property because it was massively overvalued at the outset.
“It covers those areas,” Pritchard said.
“But if there’s a valuation problem the valuer’s indemnity will kick in as well to cover some of that, so it’s a shared bond when it comes to that part.
“The insurance company owns the assurance bond. They take over, pay out to the investor 80 per cent and they take over the property.
“It’s quite a clever product, I didn’t design all of it, I came up with the concept and other people came up with the rest of it.
“It’s a win, win for everyone. If you don’t claim on it, the insurance company wins. If you do have to claim on it, the investors who thought they’d lost all their money gets the majority of it back and then the insurance company that has the assurance bond owns that property.”