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More than 100 firms have ben warned to prepare for the worst case scenario after failing to secure professional indemnity insurance (PII) on the open market ahead of the 1 October renewal deadline.
The SRA has written to 141 firms that are currently sitting in the extended policy period (EPP) reiterating compliance obligations. The regulator said firms would be expected to work with an SRA supervisor to draw up should they need to wind down because they were unable to secure cover.
Firms have until the 29 December to get PII cover or face being forced to wind down in accordance wit the SRA’s guidelines.
SRA director of supervision Mike Haley said: “There is a danger that firms do not plan for the worst, and that could put their clients’ interest at risk, meaning we would have to step in. That is something we are keen to avoid as there is disruption for clients and an associated cost for the profession.”
The SRA was originally notified of 277 firms that needed to enter the EPP, which was put in place after the SRA withdrew the assigned risks pool (ARP), the insurer of last resort for firms unable to get insurance (14 April 2011). At the end of October, it confirmed that 153 firms could face closure after being unable to get insurance (31 October 2013), there are now 141 at risk of closure.
The EPP lasts for 90 days, and during the last 60 days, known as the cessation period, firms are prohibited from taking on new instructions and must prepare to close down at the end of the period if they do not find an insurer.
Since 1 October 136 firms have secured a new policy since entering the EPP.
Haley added: “We’re aware of the different plans some of [the firms] have, such as merging with another firm or selling their business, but all [firms] need to know that when the EPP ends, they will no longer have insurance and therefore will not be able to undertake any reserved legal activities”.
As well as scrapping the ARP, the SRA has withdrawn the the single renewal date from October 2013 and changed the name of the ’qualifying insurers’ list to ’participating insurers’ to remove any notion that the SRA had in any way vetted those insurers providing policies.
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).