Number of firms in ARP drops below 300
The number of law firms in the assigned risks pool fell to 286 this week, allaying fears that it would reach 500 by the end of the year.
The number of law firms in the assigned risks pool fell to 286 this week, allaying fears that it would reach 500 by the end of the year.
The figure however remains nearly twice as high as last year's, which set the previous record at 150.
Fears over higher risk exposure following the recession has also forced premiums up, with the latest estimates anticipating that the market will be worth £242m, an increase of seven per cent on last year's £226m.
The dramatic rise in the number of firms falling into the ARP, combined with the ensuing costs borne by qualifying insurers and the rest of the profession, has prompted the SRA to launch a review of the system.
The consultation proposes to scrap the ARP altogether from October next year. It would also require the previous year's insurer to provide run-off cover where a firm fails to secure indemnity cover closes without a successor practice.
Andrew Long, chair of the SRA Financial Protection Committee and the Board member responsible for this policy area, said the ARP appeared not to be achieving its main objective of providing a safety net for firms experiencing temporary difficulties.
'Very few firms seem to come out successfully to practise again successfully with open market insurance', he told Solicitors Journal. 'Far more often ARP membership is a staging post on the road to closure, often resulting in a more protracted and costly end for the firm'.
According to Long the cost of the ARP was ran to £28m net to date, 'with more losses to come'.
'Just as importantly the ARP currently allows a number of firms to continue practising when they should have closed. Many of the firms in the ARP constitute a risk to clients and also to the profession,' he added.
There were 24 active insurers in the PII market this year, including four new ones: Allianz, XL, Lemma, and Inter Hannover. Inter Hannover entered he market last year but only wrote a very small amount of business.
Twenty of those insurers had premium income over £1m each, and nine had premium income of more than £10m each.
The four new insurers wrote £40m worth of policies this year, amounting to 16.5 per cent of the market.
Earlier this week, the SRA also updated its guidance on referrals, which now positively asks solicitors 'not enter into a referral agreement with an introducer whose overall scheme or arrangement will not be in the best interests of the clients'.