The Solicitors Regulation Authority board has been considering the future of the assigned risks pool (ARP), the arrangement by which firms that have been unable to obtain professional indemnity insurance in the open market are provided with cover for a limited period.

The ARP is underwritten by all the qualifying insurers as a condition of participation in this market. The number of firms in the ARP has increased dramatically in recent years, from 28 in 2007/08 to 259 in May 2010. Consequently, the cost of the ARP has increased considerably and many solicitors whose firms are not in it are concerned that it is significantly increasing their premiums. The SRA board has concluded that continuation in its current form is simply not sustainable.

We have gone to great lengths to ensure that our decisions have been based on as complete information as possible and all relevant views have been fully taken into account. The responses to two consultations and a full equality impact assessment have been considered. The latter included research commissioned by the Law Society and information from qualifying insurers about their approach to equality.

The option of closing the ARP altogether was proposed at the beginning of the process. However, we concluded that, because of the potentially detrimental consequences to certain sectors of the profession, some kind of safety net is required.

We have decided to retain the ARP at this juncture, but from 1 October 2010 no newly established firms will be able to go straight into it, and the current two-year limit for firms to remain will be reduced to one. The SRA will be able to allow a firm to stay in the pool for a second year, subject to objective criteria.

Our aim has been to preserve a system of sound financial protection for clients, while maintaining a sustainable competitive market for solicitors' compulsory professional indemnity insurance. In conjunction with the Law Society, we will consider ways in which we can give better support to firms to reduce the risk of them entering the ARP in the first place.

For many firms the uncertainty about the future of their insurance arrangements has been compounded by the placing of the Irish firm, Quinn Insurance, into administration under Irish insurance legislation. For the time being, Quinn insurance policies remain valid, and solicitors insured with Quinn need not take further action. But I urge all firms that have an indemnity policy with Quinn to monitor the SRA website (www.sra.org.uk), where we will post the latest guidance at least until the end of October.

In the wake of our review of our overall approach to regulation and the expanding legal services landscape, we are about to start a root-and-branch review of client financial protection, with a view to introducing the outcomes in time for the renewal on 1 October 2011. The review will be wide-ranging and include both compulsory professional indemnity arrangements and the compensation fund. We shall consult closely with the profession, consumer organisations and the insurers as we undertake this work.

We are also making arrangements for a meeting with black and minority ethnic practitioner groups and insurers to explore the concerns which have been raised about the ways in which the insurance market works for some sectors of the profession. It is essential that we can all have confidence that the system is working fairly, effectively and efficiently.

New disciplinary procedure Until 1 June 2010, the SRA had no option in cases where a reprimand was thought to be an inadequate penalty but to refer the solicitor to the Solicitors Disciplinary Tribunal. Referral to the SDT inevitably entails delay, additional stress for the solicitor and the risk of costs increasing to the point where they may substantially exceed the fine imposed by the SDT.

However, the SRA now has the power to impose a written rebuke and/or a penalty of up to £2,000, having made a finding of breach of regulatory obligations or professional misconduct. The new rules, which apply only to matters where the act or omission giving rise to the SRA finding occurred wholly after 1 June 2010, can be found on our website.

For the avoidance of doubt, the most serious disciplinary cases will continue to be referred to the tribunal, including all in which dishonesty is alleged.

The civil standard of proof (the balance of probabilities) will be applied in SRA decisions, as it always has been in cases not referred to the SDT. Both rebukes and fines, which can be ordered together, may be published in the public interest. There is a right of appeal to the SDT against an order to pay a penalty and also against a rebuke if it is intended to be published.

The SRA’s new HandbookWe have now published our new Handbook for consultation with the profession and other interested parties. This is driven by our move to outcomes-focused regulation and the need to re-draft sections of the regulatory regime to accommodate alternative business structures.

The Handbook can be found at the SRA website.

Charles Plant is chair of the board of the Solicitors Regulation Authority