The SRA has asked insurance broker and risk specialist Marsh to look at the question of whether some solicitor clients are prejudiced because some solicitors insure with unrated insurance companies.
The ratings of insurance companies are designed to give consumers an indication of the financial strength of the insurance company and therefore its ability to pay out on future insurance claims.
Depending on the outcome from the Marsh review the SRA may issue a consultation on whether only rated insurers can provide professional indemnity cover to solicitors’ clients.
The SRA press release states “The review was sparked following the problems faced by Latvian insurer Balva, which has gone into liquidation.”
“The Latvian financial services regulator claimed this did not qualify as an insolvency event. Other issues involving the collapse of Gibraltar-based Lemma in September 2012 also raised concerns at the Authority.”
“Marsh’s initial findings have suggested that there may be inconsistencies in protections for clients depending on the status of the insurer – protections that were believed to be the same. The SRA has therefore proposed to its Board that it insists upon all those applying to be added to its Participating Insurers list have a financial strength rating of at least B from a recognised rating agency.”
Agnieszka Scott, Director of Policy and Strategy said: "We have always resisted calls to insist that insurers have a rating for a number of very valid reasons. The most valid of these was always the fact that we understood the protections offered to clients were the same, regardless of who their solicitor was insured with.
"Recent events however have made us look again at this issue to ensure that clients are protected. And we have been told that there may be inconsistencies, so we are proposing on insisting on a rating for insurers on the participating list."
The SRA will consider whether or not to issue the consultation when the full review is concluded.
Solicitors who buy insurance from an unrated insurance company may face the spectre of having to re-buy the insurance in the event their provider fails. So whilst a cheap quote may look appetising at renewal this may actually turn into a case of paying the price if things go wrong.
