The future of post six-year run-off cover (PSYROC) for firms - and the Solicitors Indemnity Fund (SIF) - is a contentious issue, but certainly not a simple one.

anna bradley

Anna Bradley

Source: SRA

That’s one of the reasons why we on the SRA Board have discussed this issue six times since the start of 2020. We have also engaged widely with stakeholders, not least through the dedicated virtual reference group we have set up. Those we have spoken to include consumer groups, solicitors, local law societies and representative groups, the insurance sector, government and other regulators.

Everyone agrees that we need a prompt decision and clarity on next steps, but to date, there has been no consensus on the best solution.

First a bit of background: we set the minimum terms and conditions for professional indemnity insurance that regulated solicitor firms in England and Wales must buy on the open market and which participating insurers must provide. This includes the requirement for firms closing without a successor practice to purchase cover for negligence claims made within six years of them closing, known as run-off cover. The firm’s last insurer has to provide this level of run-off cover, even if the firm does not pay the premium.

Historical analysis shows that around 90% of run off claims are made within a six-year period (which is also the usual limitation period within which professional negligence claims must be made in the courts).

This cover was originally provided through SIF, a mutual indemnity insurance provision funded by the profession. But in 2000 the Law Society took the decision to place the SIF into run off and move to the above open market alternative.

SIF initially covered claims made during the period a firm was covered by the SIF and claims made after 31 August 2000 by law firms that had closed without a successor practice before then. The Law Society also decided to use the SIF surplus to fund post six-year run off cover for firms that ceased on or after 1 September 2000 without a successor practice, once their standard six-year run-off cover had expired.

Since our establishment in 2006, our arrangements have included provision for the SIF, run by a separate company, SIF Ltd. We have agreed on three occasions to extend the provision of PSYROC through the SIF, against the backdrop of concerns about its affordability without any additional funding. The latest extension was to 2022, and was to allow more time to consider longer term options.

These more recent discussions have surfaced the wider principled question for the SRA - should our regulatory arrangements include PSYROC? So now we are setting out some options in a consultation on the future of PSYROC and of the SIF itself. All of us on the board want to hear what the profession, consumers, insurers and others think so we can make the right decisions.

Before touching upon the options, I want to stress that we really do have to make decisions soon. No one has paid into the SIF for a long time and based on actuarial advice, SIF Limited has told us that a further extension is not prudent, bearing in mind SIF Limited’s solvency policy and without any additional funding.

I should also be clear that we exercise our functions in the context of the regulatory objectives. In particular, we work for the wider benefit of the public, and are constrained by law from acting outside our remit or for the purpose of supporting or protecting members of the profession. It is our job to balance our various objectives to create a regulatory system that delivers the best possible outcomes in the public interest, and an appropriate level of consumer protection, however this does not guarantee no risk for consumers. The consultation gives more detail on all of this.

Our consultation explores a range of options, including ceasing to provide for PSYROC, continuing PSYROC through the SIF with new funding arrangements in place, arranging cover though another vehicle (possibly in a more targeted form), or arranging through insurance on the open market.

There are some tough questions to answer. Where would additional funding come from and what would that mean for consumers? Would a focus on, say, conveyancing or wills be an option? And if the SIF no longer provides PSYROC, what should happen to any residual funds?

The paper invites views on these and other considerations, explaining that because of the evidence we now have, our preferred option is not to continue the provision of on-going PSYROC. In particular, forecasts show that for the 10 years from 2023, the number of consumers likely to benefit each year would be around 31, with the average value of claims paid out, including defence costs, at £34,600. The requirement for ongoing funding from the profession is estimated as up to £2.4m a year and may, of course, be passed onto consumers. Bearing all this in mind the costs of provision, compared with the volume and value of claims are unlikely to be a proportionate or efficient way of delivering consumer protection.

You will of course have your own views so it’s time to have your say, we particularly welcome any further evidence we have not yet identified. Our consultation runs until 15 February and we’ll be running webinars, roundtables, surveys and ongoing meetings, including with our virtual reference group, ahead of making decisions in February.

I look forward to hearing your views.


Anna Bradley, is chair of the Solicitors Regulation Authority board


You can respond to the consultation here.