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Legal Futures 
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Hundreds of firms face closure after failing to secure insurance
Gary Horswell's insight:
This is no suprise to many in the professional indemnity market who had suspicions that the reported number declared as having entered the Extended Policy Period and lining up for closure was too low. If the number reported here is anywhere near correct, the cost would be vast aside from the resource needed to oversee the shut-down of around 5% of law firms in England & Wales.
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Law Gazette
Gary Horswell's insight:
Let's hope the SRA learn from this year's mess and provide a more sustainable set of rules for the market to help small firms in the future.
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PII insurers cut back cover for 2013 renewal
Gary Horswell's insight:
Not great news for smaller practices. Solicitorspii.com can help with the cost of this overhead.
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'Blanket' notifications not to be rejected out of hand Lexology (registration) The High Court of England and Wales recently handed down its decision in McManus and Others v European Risk Insurance Co which considered whether a professional...
Gary Horswell's insight:
A good outcome for insured firms who face having to notify Insurers of multiple potential claims which has always been a tricky area, despite the Rothschild decision. Insurers often react negatively because of the impact that large scale claims reserves has on their financial liabilities. Insurers rejection of blanket notifications can be hugely stressful to insured firms but specialist brokers with an effective claims service can help.
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SRA considers credit ratings for professional indemnity insurers The Lawyer “However, in the light of the insolvency of Lemma last year and recent developments with Balva, we decided that we need to look again at the impact of introducing a...
Gary Horswell's insight:
Long overdue but its a concern that the outcome will not be implemented until 2014. Many more firms may be at increased financial risk by this time.
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Gary Horswell's insight:
The financial position of law firms will be of key interest this year to Qualifying Insurers who provide Professional Indemnity cover, due to obligation they have to provide 6 year run-off cover post closure.
Any firm in financial difficulty should seek help before it makes the problem worse with adverse PII renewal terms (or even no insurance options at all for the future).
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Howden Windsor and AmTrust Europe in solicitors' PI capacity deal
Gary Horswell's insight:
Welcome new capacity for the 2013 solicitors renewal from an 'A' rated Insurer.
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The way the legal profession is insured will be examined in the High Court this year in a major test case that could have implications for how all firms obtain indemnity cover.
Gary Horswell's insight:
The outcome of this case, arising from the aggregation of a series of claims from the actions of one individual, could affect solicitors professional indemnity insurance significantly.
A decision in favour of Insurers should prompt firms to revisit their assessment of risk and perhaps raise substantially the level of PI cover carried to recognise the risk of multiple claims from a single source being subjected to a single policy limit.
A decision the other way will be costly for Insurers and may reflect in the levels of premium charged at renewal.
One to watch in 2014...
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If what the brokers tell me is right, firms like mine are on the point of extinction.
Gary Horswell's insight:
Balva gone into liquidation (see Frank Maher's comment below article) and 175 firms now in the Extended Policy Period hoping to find another Insurer in time to beat the deadline to start closing down. Fewer firms than many of us thought but there could be some more to come yet. Hugely worrying for any firm relying on Balva for its run-off cover or to pay outstanding claims notified.
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Solicitors’ professional indemnity insurance rates are set to rocket following the withdrawal of underwriter Berliner from the market, leading insurance brokers have warned.
Gary Horswell's insight:
This is a blow for small firms who had breathed a sigh of relief moving from Balva after it fell into administration, onto Berliner. With some 1,300 firms reported to be caught by this situation, obtaining alternative quotes will be challenging with only weeks to go before renewal, but there is Insurer capacity available. With Balva policies continuing to apply until 30th September any claims notified between now and expriy date need to be reported to an Insurer where payment is uncertain at best. Under the ARP replacement arrangement, the Extended Policy Period provides only 30 days beyond renewal to obtain alternative quotations, after which the firm must be closed down. It seems that Balva may be forced to provide this 30 day EPP if it is of any real value. New potential Insurers will almost certainly want to see as many claims as possible 'ring fenced' into Balva's policy as, in the event of Balva's administration being an 'insolvent event' claims will be pushed onto the FSCS for eligible firms, or left to the firms themselves to settle where they are not eligible.
Firms affected should act quickly and contact alternative brokers with capacity as a matter of urgency.
Solicitorspii.com can help.
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UK price tag for Balva collapse could reach £60mn The Insurance Insider (subscription) The potential collapse of Latvian insurer Balva could cost the UK Financial Services Compensation Scheme (FSCS) around £60mn based on its market share in the UK...
Gary Horswell's insight:
This is bound to fuel the debate raging among PII brokers about the use of un-rated Insurers by solicitors. I can see why some brokers choose to offer their clients un-rated Insurer security. A large chunk of the market is structured in anti-competitive ways to limit exposure to independent scrutiny. For some Law Firms, un-rated Insurers are either the only option open to them or the only one they can afford. No insurance means closure of the practice with all the fall out involved.
But is there cover if the Insurer isn't around to pay claims in years to come?
It is frustrating to brokers who have to pay the inevitable FSCS levies that will flow from Lemma, Balva and whoever is next in line.Parallels spring to mind with banks who sold PPI policies - brokers that were never involved with the product still had to meet their share of compensation. Brokers who earned large scale commissions for placing business with these Insurers should meet the costs involved. Even one or two national 'brokers' will be watching this with concern.
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Solicitors’ Professional Indemnity Insurance 2013/14 http://t.co/ykkwluPXRP
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Gary Horswell's insight:
Cutting insurance costs by taking a 'cheap' policy option can prove to be more expensive in the long run. This should concern all firms whether directly affected or not. Could the SRA cope with a large number of interventions? Can the profession afford the costs? Policies that deliver are available as long as risks are understood and managed by the firm covered and you use an effective broker.
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Gary Horswell's insight:
A credit rating for an Insurer is not a guarantee against failure, as past experience has demonstrated, but this article highlights the dangers involved when professional indemnity insurance is bought for compliance 'tick in the box' reasons, rather than to protect clients and the firm itself.
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Specialist PI brokers will mostly support this initiative. Credit ratings are no guarantee of long life for an Insurer as we are all too well aware, but I wonder if the minimum 'B' rating reported gives sufficient financial strength to protect policyholders and their clients.
Insisting on an 'A' rating of some kind would narrow the field of Insurers, creating unwelcome upward premium pressure but it would give greater protection for law firm clients.
Numerous 'A' rated carriers only offer products through exclusive facilities tied to the dominent national brokers and unless this monopolistic influence is also broken, smaller more cost effective brokers may not be able to access them, leaving law firms with no choice of broker and facing higher premiums as a result of unjustifiably high levels of hidden commission.