SRA list placed in doubt

The Solicitors Regulation Authority (SRA) has taken the unusual step of naming 136 firms which failed to obtain indemnity cover, and is considering banning unrated insurers altogether.

The firms did not have indemnity insurance by the 1 October deadline and failed to secure new cover during the 90-day extended policy period. The SRA said it named the firms “in the interests of protecting consumers and third parties”, adding that “robust action” was being taken against some firms which had not closed properly.

However, Frank Maher, partner at Legal Risk, says: “The list of 136 should be treated with caution. I know of one firm which had a quote which it could afford but decided to merge instead and is on the list. I heard of another who had planned to retire anyway. So there are firms on the list which should not be.  

“I also believe it does not present a true picture of the problems experienced on the last renewal once account is taken of the forced closures and mergers and sales which took place in anticipation of the renewal, not to mention those crippled by premiums and debt.”

How the next renewal of insurance is likely to pan out is “very difficult to predict”, Maher says.

“I don’t want to sound too alarmist about it, and it may be ameliorated by the number of firms who did deals for more than 12 months, but I would expect another filtering out of a few firms. I know there are firms with deteriorating claims who are already concerned.”

The SRA Board is due to meet this week, to decide whether to consult on a ban on unrated insurers.

Maher says: “On the assumption that that will happen, as tends to be the case, we can expect further pressure."