SRA rules out premium reduction for assigned risks pool
The Solicitors Regulation Authority (SRA) has ruled out any possibility of reducing assigned risks pool (ARP) insurance premiums, despite large numbers of firms having had no option but to join the pool.
Some 342 firms are now in the ARP, where they pay 27.5% of their turnover to the Law Society, after failing to secure indemnity insurance premiums on the open market. However, according to the SRA, this number “changes virtually by the hour”.
As reported in NLJ earlier this month, many firms struggled to renew in a hostile insurance market leading up to the 1 October deadline, and premiums soared by up to 300% amid rising professional negligence claims. Legal Risk partner, Frank Maher, who has been advising firms in difficulty, said many firms were having “enormous trouble” (see www.newlawjournal.co.uk: “D-day casualties expected”).
In September, the Law Society wrote to the SRA to ask if premiums could be reduced. However, an SRA spokesman said a reduction was impossible: “The ARP premium rates for the indemnity year which began at the start of this month were fixed many months ago.
“They are contained in rules made under statute and in a set of contracts made earlier this year. It is not realistically possible now to change those rates. To do so would entail both retrospective rule making and the consent of numerous contracting parties to change, to their disadvantage, existing contracts.
“Solicitors who have not yet obtained market cover can still do so. If market cover is obtained before the end of November, and if the insurer agrees, insurance can be backdated to 1 October, thus enabling such firms to leave the ARP. If a firm is able to secure cover in the market but with an inception date after 1 October 2009, then the firm will need to effect an ARP policy for the period from 1 October 2009 to the inception of the market policy.
In those circumstances the ARP would adjust the premium in accordance with the rules, and the firm could also apply to the SRA for a waiver to further reduce the ARP short period premium.”
Finance company Syscap says it has received record requests for funding from law firms, including for loans of up to £5m.
A list of brokers and insurers can be viewed online at www.sra.org.uk/indemnity.
The Law Society has set up a professional indemnity helpline. Concerned solicitors can phone 020 7320 9545 or e-mail PII@lawsociety.org.uk.
