TWO DAYS after the expiry of the deadline for renewing professional indemnity insurance, 55 solicitors’ firms have applied to join the Law Society’s “safety net” insurance scheme, the Assigned Risks Pool.
This indicates that these firms have had difficulty in renewing their insurance, without which they cannot renew their practising certificates and cannot practise.
The number of firms on the society’s books is 2,238, so the overwhelming majority of firms have obtained cover, according to Ken Murphy, director general of the society, who acknowledged that for some firms, obtaining insurance was “very difficult”.
The risks pool reopened this year, having been closed last year because of the unwillingness of insurers to participate in it.
It is a scheme operated by the society which provides insurance cover for those who were unable to obtain it in the market. Similar schemes operate in other areas where insurance is compulsory.
Solicitors who join it will pay higher premiums than those available in the marketplace, but they can leave it when they obtain insurance from an insurer, Mr Murphy pointed out. Typically, firms enter the pool while they are negotiating terms with insurers, which may include modifying their working practices or business mix.
The insurers underwrite claims that might arise from those in the pool in proportion to their share of the solicitors’ insurance market.
The firms, which have found it difficult to obtain insurance cover at reasonable rates, are typically those with a negative claims history or with a business mix perceived as risky by insurers. In recent times, conveyancing has become seen as risky.
Mr Murphy said some of the firms entering the pool will have received quotes and are entering it on a precautionary basis, while they continue to negotiate terms with their insurers.
Solicitors will not get a renewal of their practising certificates in the new year if they do not have professional indemnity insurance. This has become difficult in recent years as premiums rose dramatically in the wake of a series of financial scandals involving solicitors, starting with Michael Lynn and Thomas Byrne. In addition, insurers lost a lot of money on their investments in the stock market in the last few years.
Last year, two insurance companies, Quinn and RSA, withdrew from providing professional indemnity insurance to solicitors. Earlier this month, the president of the society, John Costello, wrote to members announcing that two additional insurance companies, UK General Insurance (Ireland) Limited and AXIS Speciality Europe Limited had signed up to provide insurance under the required regulations.
“Quotes are still going out, and people are negotiating between insurers. Some are also still answering queries from insurers,” Mr Murphy said.
The reopening of the risks pool means no solicitor should be without cover when seeking to renew their practising certificates next month.