Legal risk specialist proposes new regulatory strategy for indemnity insurance
A legal risk specialist has proposed a new regulatory approach to indemnity insurance, as hundreds of firms await further news on Latvian insurer Balva.
Some 1300 firms, or about nine per cent of law firms, were insured with Balva, which has been prohibited by the Latvian regulators from writing new business in the UK from 1 March 2013. The Solicitors Regulation Authority (SRA) has written to firms to reassure them that their existing policies will not be affected although they may not be able to renew these.
Writing in NLJ this week (published Friday 26 April), risk specialist solicitor Frank Maher says many firms struggle to find cover, and nearly one-eighth of the profession’s total premium payment is made to unrated insurers such as Balva.
Maher, a partner in Legal Risk LLP, suggests that a combination of “laundry listing” and a regulator-approved waiver could provide “an imperfect solution”.
“We have to accept that there is no perfect solution,” he says.
“However, I do believe that if the firm could provide the SRA with assurance as to the extent of laundry listing which had been done...involving multiple potential claims from rogue partner or employee 'X', there would be more prospect of obtaining cover if a waiver permitted another, rated insurer to offer cover on terms which excluded claims arising from the activities of X.
“That might mean some claims were uninsured, but in practice they would be more likely to be claims by lenders. Under the current system, it is the entire client base of a firm which is at risk. An imperfect solution, maybe, but it might help.”
