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This year, The Lawyer’s annual ranking of the largest UK law firms by turnover is available as an interactive, digital benchmarking tool. For the first time this will allow you to manipulate each data set against the metrics of your choice.
Around 1,300 firms will be forced to find replacement professional indemnity insurance (PII) or be put at risk of being closed down after the Latvian authorities yesterday withdrew operating licences from domestic insurer Balva.
The SRA said it was seeking advice on whether the collapse of Balva was legally an “insolvency event”, which would put it in breach of the regulator’s qualifying insurer (QI) rules.
The insurer, which was halted from taking on new business in the UK at the end of March, provides PII to around 1,300 firms – the equivalent of one in eight firms in England and Wales.
Balva must now appoint a liquidator and agree the procedure for debt covering with the Latvian Board of Financial and Capital Market Commission (FCMC). Failing that it must transform itself into a so-called ’legal person’ that does not pursue insurance business.
The FCMC said all Balva’s insurance policies are still effective and the company was obliged to continue fulfilling the terms of contracts entered into with its policyholders.
Under SRA rules, however, firms will be required to find alternative cover in the live market within 28 days or be forced into the assigned risks pool (ARP), where policy rates are charged at a premium.
Rule changes on how the ARP is governed mean that firms are now only allowed to stay in the ARP for three months, unless they are granted special waivers by the SRA. Those that are still unable to find cover after that point will, under SRA rules, be forced to cease trading because they do not carry PII insurance.
The insurer, which was unrated, was listed on the SRA’s Qualified Insurer list for the 1 October 2012 renewal date, making it a viable option for firms forced to look for a cheaper policy from an unrated insurer that is more willing to accept higher-risk firms. Provisional figures for the renewal date show that 12.5 per cent of the profession’s total premiums of £239.3m were paid to unrated insurers.
The news has once again stoked debate about whether the SRA should allow unrated insurers onto the QI listings. According to Simon Lovat, a PII expert at broker UIB, firms covered by Balva will be left unable to pay out on potential claims because the insurer has been forced to cease trading. The cost of putting the firms into the ARP, he added, would be picked up by other rated qualified insurers participating in the market.
In a statement the SRA said: “The position under the SRA indemnity insurance rules is that, as yet, there has not been an ’insolvency event’ as defined in the UK. We are seeking advice on the application of the definition of ’insolvency event’ to this developing situation, working with our partners at the Financial Conduct Authority and the Prudential Services Regulator.
“If an ’insolvency event’ occurs we will contact all firms currently insured with Balva explaining the action they must take.
“This would involve any firm that has professional indemnity insurance with Balva obtaining replacement cover within four weeks of any confirmation of any insolvency event. Those that fail to find an alternative insurer would drop into the Assigned Risks Pool (ARP).
“Firms should contact their broker (if they have one) and obtain their advice. If they do not have a broker, they will need to contact one of the Qualifying Insurers who deal direct with firms to arrange replacement cover.
“A letter containing further details would be sent to all firms if an insolvency event is confirmed.”