Feature – Solicitor professional indemnity market “a perfect storm” – 29th June 2010
Today’s Conveyancer has contacted most of the insurance brokers on the Law Society published list of brokers to discuss their views on how the solicitors’ professional indemnity market is likely to shape up over the coming months. Phrases like “bloodbath”, “disaster”, “toughest year yet” and “perfect storm” are common. No single broker that we have talked with believes that the use of language and challenges that many firms face can be over exaggerated.
More surprisingly a large number of the brokers that we have spoken to have said that due to the very onerous rules set out by the Solicitors Regulatory Authority that Insurers really aren’t interested in the solicitors market this year at all. Many feel that they will service their existing clients but they aren’t keen to stay in the market.
Windsor Partners a large broker based in the heart of London’s insurance market have explained the history of this insurance market in some detail and that clearly sets out the problems the market faces.
Steve Ray of Windsor explained that when the Law Society moved from the SIF to an open market the premiums dropped from £250M to £155M in the first year and there were 34 qualifying insurers. He went on to explain that up until 2007 there was an average of 42 firms in the Assigned Risk Pool in 2005, 2006 and 2007.
By 2008 Quinn was taking 10% of the market as other insurers felt that they could not service small firms on the low premiums that Quinn were happy to offer.
In 2008 Steve Ray explains that the ARP had risen to 166 firms and those firms should have paid about 27.5% of their revenue in premium totalling about £5.5M. In reality insurers only collected £2M as many practices either couldn’t or wouldn’t pay. The incurred claim position for that year now stands at £35M with some commentators considering that the eventual outcome will be a lot worse as each of the firms in the ARP have a 6 year run off period.
We will be watching the professional indemnity market closely over the coming weeks with tips and advice to firms as to how they should deal with the renewal this year.