SRA responds to Financial Protection policy comments
23 April 2012
The Solicitors Regulation Authority (SRA) has published the feedback received during the consultation on its Financial Protection Policy over the turn of the year.
The consultation ran for 12 weeks until January 17 and looked at the changes proposed as part of the April 2011 Policy Statement. The numerous stakeholders' comments and views, along with the SRA's responses to them, have now been published.
The main changes included listed in the consultation document and on which the SRA sought views were:
- the closing of the Assigned Risks Pool (ARP) as a provider of policies of qualifying insurance from 30 September 2013 (with the exception of the continued provision of run-off cover started before that date),
- a requirement from October 2012 that all policies of qualifying insurance make provision for extension by 90 days at the end of the insurance period if the insured firm has not taken out a new policy of qualifying insurance,
- changes to Authorisation Rules to control the work that may be undertaken by firms during that 90-day period, and to remove authorisation at the end of the 90-day period should no new policy of qualifying insurance be obtained,
- provisions for the funding of the ARP in 2012/13 to be provided by both the regulated community and the qualifying insurers,
- provisions to move responsibility for making payments in respect of uninsured firms from the ARP to the Compensation Fund in 2012/13
Antony Townsend, SRA Chief Executive, said: "We're grateful for the responses we received from all respondents. Getting a wide a range of views on our proposals enables us to make sure that what we're doing is the best way for us to develop our policy.
"As a public interest regulator, our objective is always to ensure that we have a comprehensive set of arrangements to protect clients through compulsory PII and the Compensation Fund. This was our only consideration when drawing up our responses to the comments made."
Some respondents suggested that there should be changes to the way the indemnity liabilities would be covered as this would reduce the profession's exposure. However, in its response, the SRA argues that the market would be de-stabilised less by maintaining the current arrangements.
There were also concerns raised about the scope of the Compensation Fund to be able to meet all client protection matters if the "side-arrangement" to provide cover for non-insured firms was withdrawn. The SRA however points out in its response that the Qualified Insurers have no responsibility for firms they do not cover, and maintaining the "side-arrangement" would require similar resources to maintaining the current ARP. The SRA has agreed with respondents on the proposal on the notice of intention not to renew cover, as this could interfere with the market, so has been withdrawn. The SRA has also agreed to requests from respondents to publish the credit rating of insurers.
The SRA's Board will be asked to approve the necessary changes to the Qualifying Insurer’s Agreement and to the rules within the Client Protection section of the SRA Handbook when it meets on Wednesday 16 May. The changes are proposed for implementation in October 2012 and are designed to ensure that the open-market system of PII is sustainable and competitive for the foreseeable future.
See the full responses to comments on Financial Protection Policy Consultation