185 solicitors firms failed to find cover

A total of 185 law firms applied to the Solicitors Regulation Authority (SRA) for the extended indemnity period of insurance, having failed to secure cover by 1 October.

The solicitors firms will receive 90 days’ cover from their previous insurer while they try to obtain a new policy. Solicitors firms cannot operate without professional indemnity (PI) cover and must close at the end of the 90-day period if they have not managed to take out a new policy.

This is the first year the extended indemnity period has operated. It replaces the assigned risks pool, which covered liability for firms unable to find insurance, and was funded by all insurers in the segment and the legal profession.

Of the 185 firms that applied for extended indemnity, ten have since secured cover, leaving 175 in the 90-day period.

Those firms can continue to practice normally for 30 days. For the next 60 days they may only work on existing cases and cannot take on new instructions.

Last year 20 firms entered the assigned risks pool.

Hundreds of firms that thought they had transferred their cover from unrated Latvian insurer Balva to unrated German insurer Berliner earlier this year were advised in September to seek alternative cover as it emerged that Berliner was unlikely to be able to write any business for October’s renewal period.

The Latvian regulator, the Financial and Capital Market Commission, barred Balva from writing new business in April. Last year Balva wrote £16.4m of premium in the solicitors professional indemnity insurance market, giving it a 6.8% market share and making it the third-largest insurer. In volume terms, it covered 9% of firms.

The SRA said it could not disclose how many of law firms in the extended indemnity period were insured with Balva.

The Law Society spokeswoman said some firms found it difficult to obtain cover in the 2013-14 renewal period because of the continued trend withdrawal from the market of rated insurers, most notably the decision by XL to withdraw from the 1-3 partner segment last year. “This effect was compounded by the aborted transfer of policies from Balva to Berliner Versicherung Aktiengesellschaft, which left around 1,000 solicitors, in the lurch, looking for insurance at the last minute,” she said.