PII implosion looms as underwriter Berliner exits market

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  • For most firms, a reputable broker will be able to find them cover, assuming they are insurable at all. The issue is not unrated insurers - they are just the symptom. The underlying problem is the unattractiveness of smaller firms to insurers generally, which pushes them into the arms of unrated insurers.

    Not all small firms are problematic, but for many insurers it's just too difficult to distinguish between the good, bad and indifferent.

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  • Sadly there is an inherent risk in small firms in that they are often too small (or unwilling to spend) to buy in either on an employee or consultancy basis proper risk management and regulatory & compliance support. (NB 'tricked up' outlook and spreadsheet 'mashups' (et descendit cum hœdis) are nothing to reli upon).

    This leaves partners takign time which they can ill afford to undertake a task which they are not well suited to.

    While small(er) firms can and often do have more rigorous and hands on supervision, than larger firms the lack of specialist support will outweigh this when considering the risk profile.

    Couple this in with the perception of a lack of resilience in respect of reserves, burrowings and the like and it is not surprising that small firms are facing an evolutionary event.

    While premiums have come down since the days of the SIF has the demise of the mutual model been overall a good thing? I think many would conclude not.

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  • Overstating the problem here.... Chancery PII and other underwriters have already created extra capacity for 1-4 partner firms. These firms are far less risky than larger firms staffed by overworked, inexperienced and target driven juniors and paralegals. Smaller firms are under less pressure to "dabble" in areas of law they know less about too, as they are not under such pressure to generate huge profits like, for example, mid-size regional "full service" firms (which is where the real risk exists).

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