More than 150 firms could face closure after being unable to get professional indemnity insurance (PII) on the open market.
Last month the SRA said 185 firms had applied to enter the extended indemnity period (EIP) (9 October 2013). Those firms were given 30 days in which to find cover or be forced into the second phase – the cessation period – when they are prevented from taking on new business while trying to find cover.
That deadline has now run out. In total, 153 firms are now unable to accept new instructions. If they fail to find PII cover before 29 December, the firms will have to close.
This is the first year for the newly implemented PII regime, which was introduced in an attempt to stabilise the market (14 April 2011).
Many fear that firms with fewer than 10 partners will be hardest-hit after fluctuation in the markets with insurers pulling out of the sector. In September underwriter Berliner exited the market, leaving more than 1,000 firms trying to find cover in the run up to the 1 October deadline (20 September 2013).
This came after XL Insurance and AIG announced plans to significantly reduce their market share while Aon Risk Solutions extended its exclusive arrangement with QBE Insurance to take a larger market share (15 August 2013).
For more on the sector read our analysis: Toughing it out