Indemnity market in turmoil as Wellington pulls out

In a move that will send shockwaves through the market, Linklaters‘ professional indemnity (PI) insurance provider is leaving the PI market. The withdrawal of Lloyd’s of London syndicate Wellington Underwriting threatens to force up further the cost of indemnity premiums.
Wellington’s departure was based on a decision to focus on more profitable areas. Deputy chief underwriter David Foreman said: “It’s purely a business decision. We took the view that PI is a non-core book of business. Harder markets mean other areas of business are more profitable.”
Wellington follows Cox and Axa in its exit, leaving law firms with a shrinking pool of providers. The number of insurers underwriting law firms’ risks has dwindled since PI cover moved from the Solicitors Indemnity Fund to an open market in 2000.
In 2001, there were eight fewer insurers covering law firms than in the first year of the open market. Of 35 insurers competing for law firms’ business in 2000, only 27 remained in 2001 and 2002 will see a further decline. Ironically, brokers have suggested that, as markets harden, the 2002 renewal season could see premiums rise by as much as 30-40 per cent.
Foreman added that Wellington would honour all quotes. The insurer writes policies for UK and US firms. Although one of the smaller participants, it is understood to have insured a number of the larger firms. They will have to look elsewhere for cover in the autumn when the annual PI renewal season comes around. It is not yet known how many insurers will sign up to the Law Society’s minimum terms for the 2002 renewal process.
Richard Holden, one of the Linklaters partners to look after the firm’s PI cover, would not comment. He said it was a private matter between the firm and its insurers.