SRA confirms large number of firms have failed to secure PII
A total of 153 firms have failed to secure new professional indemnity insurance cover, the Solicitors Regulation Authority (SRA) has confirmed.
The 153 have now gone into the second, 60-day stage of the extended policy period (EPP). The first 30-day stage ended yesterday.
Firms can carry on as normal during the first stage, but can only deal with existing instructions during the second stage. If the firms have not found insurance by 29 December, they will have to close.
The SRA had been notified of 226 firms that needed to go into the EPP, but 73 of those have since secured cover.
Frank Maher, partner at Legal Risk solicitors, says: “The numbers are quite small when compared with the number in practice, but that doesn’t reveal the scale of human misery with people facing bankruptcy, not to mention the effect on their staff and families.”
The 1,300 firms who were insured with Latvian insurer Balva also face uncertainty, given the six-year run-off period. The Latvian authorities withdrew Balva’s operating licence in June.
Maher says he is dealing with some firms who were insured with Ukrainian insurer Lemma, which went into liquidation two years ago. The Financial Services Authority protection scheme covers 90% of claims where the firm has a turnover of less than £1m.
“Most firms who were with Lemma will qualify for the scheme, some don’t in which case they are personally liable,” he says.
Maher says he knows of three top 100 firms that had problems with renewal this year, which showed that that indemnity insurance is a profession-wide issue.
“I think it’s high time the profession explored what consumer protection we can offer going forward,” he says.
“We should have a conference of the profession about this, with representatives of the consumer interest invited to participate so they can understand that it’s not possible to provide complete protection when that protection may be illusory. It would be better to have less protection from insurers who can deliver than complete insurance from insurers who may not—the wider the cover the more it forces firms to obtain insurance from insurers who can’t offer peace of mind."
