Pressure mounts on professional indemnity market as renewal date moves closer

Firms with fewer than 10 partners are being forced into the unrated insurance market when it comes to renewing professional indemnity insurance (PII) cover, leading insurance brokers have warned.

John Wooldridge
John Wooldridge

While larger firms have seen rates relax as the final 1 October renewal date moves closer, smaller firms are being rejected by top-rated underwriters, which are being more selective about the risks they choose.

According to John Wooldridge, a director of PII broker Howden Windsor: “Many law firms do not appreciate how turbulent this year’s professional indemnity market is, especially for firms with 10 partners or less.

“Most of the main A-rated insurers are being more selective this year and, as a result, firms with more than 35 per cent of their business coming from commercial and residential conveyancing are finding it harder to find affordable premiums.”

Brunel Professional Risks director Trevor Moss warned that some sectors, in particular commercial and residential conveyancing firms, would find it difficult to secure cover.

“With many insurers cutting back their books we’re seeing increased levels of insurers declining to offer renewal terms to firms,” he said, warning, “this could mean that many firms will struggle to secure cover by the October renewal date.”

Woolridge added that firms that have had to change insurer have been hit hardest. He said: “We’re already seeing rate increases for the firms that have had to change insurers. A number of underwriters, for a variety of reasons, have increased rates sharply, or simply not offered renewal terms at all.”

Once again the market has fluctuated as the renewal date moves closer with a number of underwriters withdrawing from the market and making space for new entrants.


Aviva was the first major insurer to cut its PII book for SMEs in March, citing a wish to restore profitability to the business. In August, XL Insurance and AIG followed suit by announcing a significant reduction to their market share for smaller firms.

Aon then extended its exclusive arrangement with QBE Insurance to include one to three-partner firms. It took until late August for the Law Society to unveil its own offering for firms with between one and four partners, partnering with Miller Insurance to cut out the cost of using a broker.

Brokers said major players were taking a more cautious approach to renewal and demanding more detailed information from firms about financial stability.

Marsh UK regulated professions head John Kunzler commented: “More underwriters are asking for financial details and looking at law firm finances. We understand this is due to law firm insolvencies and the obligation for underwriters to provide run-off coverage for six years whether or not they are paid any premium.”

It is the last 1 October renewal date for the market, which has already seen a number of reforms introduced with the aim of relieving the pressures on the PII sector. The assigned risks pool (ARP), the insurer of last resort, will be dropped from October meaning that firms that are unable to renew cover must be given an extended indemnity period (EIP) by their insurer from the previous indemnity year.

If the firm is unable to get cover in the open market after a 90-day period they will enter a cessation period of 60 days in which firms will be unable to accept new instructions and can only perform work in connection with existing instructions.

Unable to get cover? Some top tips include:

– Firms with strong finances and low dependency on bank lending should make sure this forms part of the submission.

– A complete and well put together presentation will always make it easier for an insurer to understand a solicitor’s business

– Prudent law firms will start their renewal process in May or June, meet with their insurer at least once during the year and work with their broker to ensure that renewal information reflects the firm in the best possible light.

– Demonstrate proactive risk management

– Seek long term deals

– If you have notified your insurers of claims in the past, provide additional information on each notification. Explain procedures that have since been implemented following an incident to reduce the risk of future claims.