End in sight for 153 firms entering cessation period

Up to 153 solicitors firms could be within two months of closing down after entering the so-called 'cessation period' yesterday, according to figures released by the Solicitors Regulation Authority.

Only last week financial rescue specialist Mark Feeney said between 200 and 400 firms would fold within the next indemnity year after failing to obtain PII cover, with as many as 5,000 disappearing in the next five to ten years as a result of financial pressure.

Under new professional indemnity rules in force from this year, firms that fail to secure insurance no longer fall into the assigned risks pool (ARP) but instead have a three-month grace period to find cover on the open market.

While in this 'extended policy period' (EPP) firms remain covered under their existing policy and may continue to take on new instructions for a month.

At the end of this initial 'extended indemnity period' (EIP), they enter a 'cessation period' during which they may no longer take on new instructions but should continue to try and arrange cover.

For the whole of October a total of 226 firms have notified the SRA that they had failed to secure cover, with 73 subsequently obtaining cover and coming out of the EIP.

The remaining 153 which have not notified the SRA are now deemed to have entered the cessation period and have until 6 November to notify the SRA and their insurer of their situation.

The cessation period will end on 29 December, and firms without policies in place will have to close.

Alongside the dismantling of the assigned risks pool this year saw the removal of the single renewal date for insurance policies starting on or after 1 October 2013.

In addition, the 'side arrangement' was withdrawn as of 1 October 2012. This provided for cover for uninsured firms that had not applied or were not eligible to enter the ARP. Instead claims arising from such firms will be considered by the Compensation Fund.