The panel rationalisation comes seven months before Sif ceases to exist on 1 September. Under new arrangements, solicitors will have the option of obtaining professional indemnity cover from a new Managing General Agency (MGA) or from approved insurers.
Dropped firms will continue to work on their existing caseloads but will not get any more referrals.
While the panel changes are no indication of which law firms will do work for the MGA, sources say it is unlikely there will be huge differences.
One insider says: "I would have thought there is a reasonably high chance that the existing Sif panel will remain as part of the MGA panel.
"One of the selling points is Sif's claims handling experience and it would be unlikely that it would make substantial changes."
Sif refers about 4,000 cases to panel firms each year, although the number of complaints against the profession has been decreasing con sistently since the early 1990s.
George Raubenheimer, head of claims settlement at Sif, says: "The appropriateness of a smaller panel has been under consideration for some time. As workload declines, there is a risk that panel firms may find it increasingly difficult to maintain teams of sufficient experience and knowledge.
"Caseloads will inevitably fall further in a run-off situation."
Lovells' litigation partner Michael Seymour says: "We deal with the less run-of-the-mill claims for Sif and are pleased to still be on the panel. The MGA will have to decide whether it wants to make changes."
David Higham, litigation partner at dumped firm Blake Lapthorn, says: "The insurance arrangements are changing, but solicitors will still need to be defended and Blake Lapthorn has the expertise, the experience and the reputation to service these needs."