SIF surplus not enough to pay post run-off claims beyond 2020

There will be no extension to arrangements providing insurance cover for closed firms beyond the current six-year run-off period, the Solicitors Regulation Authority (SRA) has confirmed.

Since September 2000, any practice that closed without a successor is permitted additional professional indemnity insurance (PII) cover through the old Solicitors Indemnity Fund (SIF) for any claim made after the six-year run-off had ended. This arrangement is scheduled to end in 2020.

The SRA has been asked to increase the cover for a further three years to 2023, but its board has decided not to change the current arrangements. Extension would be contrary to existing policy aims, it said, and SIF might not have sufficient funds to cover additional claims.

Views on the issue were sought last summer, but there was no consensus on the best way forward. Respondents did say that a quick decision was needed, however.

Paul Philip, the SRA's chief executive, commented: 'We consulted on reducing the amount of run-off cover because many see it as a barrier to closing down, and that's still something we want to look at. Extending cover through SIF would be contrary to that aim and would be suggesting that six years run-off cover is not enough.

'Taking this decision does not change anything, the extra cover will still end in 2020. But this provides clarity for those that wanted to know what we might do.'

In a statement to SJ, the SIF's chief executive, George Raubenheimer, said: 'SIF is providing this protection up to 30 September 2020 and the cost of this will be paid for out of the expected SIF surplus.

'Recently SIF has noted a significant increase in post six year run-off claims in both frequency and value requiring adjustments to its ultimate expected liability position.

'This means that although SIF has sufficient financial resources to meet all expected claims up to 30 September 2020, its surplus is unlikely to be sufficient to fund any further extension beyond that date.'

'This has been taken into account by the SRA in reaching its decision.'

Frank Maher, a partner at Legal Risk, said the regulator may have reached a 'fair conclusion' but wanted more information is needed to identify the problem at hand.

'The question really depends on what the instances of claims are against people after their six years of insurance has expired. What we haven't been provided with is the claims figures that have been made against the SIF since it took on that sole responsibility.'