News release

Firms warned to confirm insurance position

The Solicitors Regulation Authority (SRA) has warned firms that have not declared their insurance position that they are breaching regulations and face enforcement action.

Firms had until the close of play on Wednesday (6 November) to inform the SRA if they were entering the second section of the new Extended Policy Period (EPP), having failed to secure new professional indemnity insurance cover. A total of 79 firms got in touch, but with 238 firms originally saying they wished to invoke the EPP and only 108 have since secured cover, a large number are still unaccounted for.

The EPP exists to allow firms to continue trading while the new cover consists of 90 days. The first 30 days is called the Extended Indemnity Period (EIP) when firms can carry on as normal, while the 60-day second phase is called the Cessation Period, and firms can only deal with existing instructions, while also working towards closing down at the end of the EPP while actively seeking insurance.

Agnieszka Scott, Director for Policy and Financial Protection, said: "So far we have shown a lot of understanding towards firms that have been late in letting us know their insurance position, but now, more than a month later, there really is no excuse. It is a requirement in the regulations that firms inform us of their situation and from now on, we will have to think about appropriate enforcement action for those that fail to contact us.

"What these firms need to remember is that if they failed to secure a new policy by 1 October, they automatically qualified for the Extended Policy Period and are therefore still practising with insurance. They won't be automatically closed down if they tell us they don't have a new insurer yet, but they are in breach of the insurance regulations by not contacting us."

Rule 17.3b of the Indemnity Insurance Rules states "Each firm shall notify the (SRA) and its participating insurer in writing as soon as reasonably practicable and in no event later than five business days after the date on which the firm enters the cessation period under its policy". Notifications from firms should be made in writing to, stating who the firm's insurer was for 2012/13.

Previously, firms entered the assigned risks pool (ARP), but this closed on 1 October 2013 (apart from issues involving prior-year obligations and run-off cover). This was one of the last changes to be made as part of the review of the Client Financial Protection Arrangements designed to ensure the market for professional indemnity insurance remained competitive.

The other final changes made this year were:

  • The single renewal date has been removed for any policy starting on or after 1 October 2013
  • The 'side arrangement', whereby coverage was provided to uninsured firms that had not applied or were not eligible to enter the ARP, was withdrawn. Instead claims arising from such firms will be considered by the Compensation Fund
  • "Qualifying Insurers" has changed to "Participating Insurers", to reduce any misunderstanding that the SRA has vetted the insurers involved

The SRA is still collating information on the amount of cover insurers have written. When this information is available, the SRA will publish this here:

Go to the insurance cover share page

The Indemnity Insurance Rules 2013 are available here:

Go to the Indemnity pages

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