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SRA to consult on unrated insurers

 The Solicitors Regulation Authority (SRA) is consulting on only allowing rated insurers to provide professional indemnity (PII) cover to SRA-regulated law firms following problems caused by the insolvency of a number of insurers.

To clarify the risks posed by changes in the market, the SRA commissioned insurance broker and risk specialist Marsh to determine whether unrated insurers in the market for PII insurance for SRA-regulated firms had a detrimental effect upon clients and law firms. The review was sparked by problems faced by Latvian insurer Balva, and the increasing frequency of similar events, which raised concerns about the way clients were in practice protected.

Marsh's initial findings suggested there may be inconsistencies in protections for clients depending on the status of the insurer, and the SRA's experience of the disorderly exit of several insurers from the market leads the SRA to conclude that unrated insurers may pose a significant risk to client protections and to legal services and legal services regulation. The SRA Board has decided to consult on the proposal that all those applying to be added to the Participating Insurers list have a financial strength rating of at least B from a recognised rating agency.

Agnieszka Scott, SRA Director of Policy and Strategy said: "We have always resisted calls to insist that insurers have a rating. Recent events such as the growth of unrated insurers in the market and higher risks of insolvency have made us consider this afresh.

“Our overriding objective is to ensure appropriate protection for consumers without driving unnecessary costs on law firms. This consultation will assist us in striking that balance."

To be eligible to write compulsory indemnity insurance for solicitors, an insurer must be authorised by the Prudential Regulation Authority (PRA) or be an EEA insurer passported into this country to write insurance business. The SRA has always deferred to the relevant regulatory bodies to vet the financial stability of insurers.

The exercise starts today (28 January) and will last eight weeks until 24 March. It is available here:

Go to the consultation

The SRA has also finally received all market share information from the participating insurers and published this on its website. In previous years, this has been prepared to show what liabilities each insurer had for the assigned risks poll (ARP), but as the ARP no longer exists, these figures are for information only.

The market share information is available here:

Go to the market share table

 
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