With a rapidly changing market place for Solicitors’ in 2010 we feel it is essential that you are with an expert broker who knows what is going on.

Market commentators are stressing that 2010 looks likely to be the toughest renewal period for Solicitors since the open market began in 2000. The reasons for this are multiple but the main factors are insurers withdrawing from the market or making their underwriting criteria more stringent meaning less cover is available for firms wishing to trade outside of the Assigned Risks Pool (ARP).

It is widely considered that very few (if any) insurers have been able to make a profit writing Solicitors PII given the wide nature of cover offered under the SRA minimum terms & conditions and the current high volume and value of claims that practices face. In the past however, return on investment of capital combined with a competitive market place kept prices relatively low.

In the last couple of years, two major issues have affected the Solicitors’ PII market which has resulted in Insurers scaling back their exposure:

• First of all, as the UK economy went into recession and property prices stalled and fell, the number of property-related claims began to rise. Given that a large proportion of the profession relies (to varying degrees) on Conveyancing work, most firms, and thus, most insurers found themselves exposed. As defence costs are covered by insurers, even the spurious claims/circumstances became expensive

• secondly, the ARP became much more of an issue for insurers. Whereas  there had typically been 30-50 firms per year in the ARP, 2008 saw that number rise to approximately 150. ARP claims, once collected premium has been exceeded, are paid for by cash calls to the Qualifying Insurers, with each insurer contributing the relevant proportion of their market share. The most recent cash call set the amount in excess of £40,000,0000. This means that an insurer with 15% market share would have to pay out more than £6,000,000 for the claims of firms that they didn’t even offer insurance to in 2008 – let alone the claims of the firms that they did offer insurance to. Worryingly for insurers, the amounts relating to this year and previous ones may still rise. Even more worryingly for insurers, in 2009 there were more than 250 firms in the ARP which could mean that any cash call figure in a year’s time is much higher. The upshot of this, is that insurers are disincentivised to write more business as they are liable to pay a greater amount in ARP claims

What does this mean for your firm

Depending on risk profile (size, claims experience, type of work, etc) some will find it very difficult to obtain cover this year. Those firms with a good record and a good risk management programme in place will have less problems, but it is sensible for most firms to expect some degree of premium rise and prepare financially for this.
It is essential that you liaise with a specialist Solicitors’ PII broker who can help guide you through this process. Tips on how to complete the appropriate submission can prove invaluable.

Our advice is that you speak to us as soon as possible. We are happy to assist with any concerns and are readily available on the other end of the phone.

Give our solicitors team a call on 020 7648 5250 now