Soaring claims to hit SPI insurers, says Datamonitor

Datamonitor research has predicted a tough market for insurers writing solicitors' professional indemnity over the next two years.

The research shows that the number of claims against solicitors will soar over the next two years, squeezing qualifying insurers' profit margins.

Claims expected to see a particular spike are those relating to sub-prime and prime lending.

Datamonitor analyst Donna Stevens said: “It is compulsory for solicitor firms to have PII, and the ARP is there for those who can’t get cover through the normal channels due to a number of reasons including a poor claims record or a major claim outstanding but not yet decided.

"The responsibility for ARP cover falls to insurers operating in the market which each have to do a proportion of this sort of underwriting. The amount of which depends on their share of the market. The increase in the number of solicitors in the ARP means that insurers are forced to underwrite more companies which have a high risk of a claim being made against them; leading to higher costs.”

Datamonitor has found that the market believes the cost of the ARP to underwriters is about 20% of their total gross written premium.

Stevens continued: “There is a danger that some of the main players may exit the solicitors' PII market. The Solicitors Regulation Authority (SRA) has the chance to make some major changes when it reviews the market this year. Should it recommend that the market be funded by members of the SRA, the market will once again become attractive to insurers and competition will increase; bringing down premiums.

"Without this move, we can expect to see insurers exiting the market and premiums rising. This is particularly pertinent as the overall professional indemnity market is predicted to return to growth from 2012, and there will thus be more attractive markets in which the main players can operate.”