Chartis, who hold the leading share of the primary England & Wales Solicitors’ professional indemnity insurance market have made a their disappointment with the new rules clear.
A spokesperson for Chartis said they “believe that the ARP needs a fundamental overhaul before this year’s renewal season (October 1st 2011). According to our projections, between 2005 and 2009, the ARP will have cost Insurers well in excess of £100m. In light of the challenges facing the smaller firms within the legal sector, there is no expectation that these figures will shrink. In fact, we expect the number of firms in the ARP to grow.”
Given the strength of the opinion it looks as if solicitors face another year of rising premiums.
Chartis went on to say “The result of the extensive consultation process by the SRA has been highly disappointing. It appears that the SRA has paid little regard to the consultation responses they have received from the industry. The key structural changes required to the framework within which Insurers and Solicitors interact have been delayed again.
Insurers cannot continue to bear unquantifiable levels of risk from Legal Practices that they elected not to trade with particularly with the stricter capital requirements that Solvency II is likely to bring.”
Against this background Chartis believes a fresh approach is needed, one in which the ARP has no place. Insurers should be liable only for those exposures they elect to write; with the 6 year run-off firmly sitting with the last commercial insurer.
Their spokesman continued, “Why should excellently run law firms pay higher premiums simply because Insurers cannot accurately price their ARP exposure with the consequence that they have to use the most conservative underwriting models. This market distortion is undesirable, and deters new insurers entering the market.
Chartis has been and remains supportive of the solicitors’ PI market but changes are necessary for this market to operate efficiently. These changes are needed quickly or we may see a contraction in capacity in this market.”
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