Alert: PII firm Balva Insurance licenses suspended
Around 1,200 firms are affected by the suspension of unrated Latvian professional indemnity insurance firm Balva.
Yesterday, the Latvian regulator (FKTK) decided to withdraw all the operating licences issued to Balva.
The news follows several recent warnings on the dangers of using unrated insurers.
The Law Society has warned affected firms to think very carefully about their alternatives and make an informed choice before opting for cover from another unrated insurer.
They warn that some firms have been offered to transfer policies across to another unrated insurer, Berliner Versicherung Aktiengesellschaft, by the broker that previously sold policies from Balva.
In accordance with Latvian law, Balva has to launch the winding-up process, by appointing a liquidator and agreeing the procedure for debt covering with the regulator, or transform the insurance company into a legal person that does not pursue insurance business.
Balva is obliged to continue fulfilling the terms of contracts entered into with their customers.
Full details are available on the FKTK website. The position under the SRA Indemnity Insurance Rules is that, as yet, there has not been an "insolvency event” as defined in the UK.
If an "insolvency event” occurs the SRA will contact all firms currently insured with Balva explaining the action they must take.
This would involve any firm that has professional indemnity insurance with Balva needing to obtain replacement cover within four weeks of the confirmation of an insolvency event.
Those that fail to find an alternative insurer would drop into the Assigned Risks Pool (ARP). Law Society chief executive Desmond Hudson said: “Our position is buyer beware. We want to ensure our members make an informed decision.
“While commercial pressures on firms may tempt them to choose the ‘cheapest’ PII quote, the true cost of this cover can be alarming. If an insurer becomes insolvent, there may be a very high price to pay, in a personal, as well as business capacity.
“Uninsured loss can have devastating personal consequences, depending on a firm’s business structure.”