Professional liability insurance experts have recently said that 2013 has the potential for ending up as a watershed year for professional indemnity insurance providers and the solicitor firms they cover.
The Assigned Risks Pool, the business liability insurance provider of last resort for the solicitor industry, is set to be dismantled in 2013. Under new regulations, any firm found to be uninsurable will continue on with their previous insurance provider before shuttering after an extended policy period of 90 days.
No longer will there be a common renewal date for professional indemnity insurance. As the industry continues to prepare for the new regulations, solicitor firms will now only be able to stay within the ARP for a maximum period of time of six months.
This means that law firms with good track records in regards to professional indemnity insurance claims will no longer need to prop up ones that are too poorly run to secure open market insurance cover. This will also aid in moderating the pressure on insurers to increase premium payments, as 20 per cent of every pound paid in premiums was spent in keeping the ARP funded in 2008 – something that industry experts suspect will continue.
Even more significantly, the ruling that states the last insurer of a firm will have loss liability for a period of six years for incidents concerning firms they decline to renew but cannot go on to find an alternative source of insurance. With liability growing an exceedingly long tail from 2011, insurers will be sure to take it into account when assessing and pricing risk going forward.
Concerns over the new liability regulations, plus ARP support costs, have led many insurers to completely withdraw from the market recently.