The Solicitors Regulation Authority and the Law Society have both issued statements reassuring Quinn Insurance policyholders that they do not need to take action after permanent administrators were appointed to the Irish insurer yesterday.

The SRA said that the full administration of Quinn under Irish insurance legislation ‘does not appear to amount to an insolvency event for the purposes of the Solicitors Indemnity Insurance Rules in England and Wales, and therefore there is no requirement at this stage for firms insured with Quinn to seek replacement qualifying insurance’.

It added: ‘We will continue to monitor the situation closely and will advise the profession of any significant developments or change to our view.’

The Law Society said that ‘financial regulators in Ireland and the UK are advising that Quinn policies remain in full force and effect’.

In its statement, the Society warned solicitors not to act on an unnamed professional indemnity insurance (PII) broker’s letter to customers of Quinn Insurance, the Irish insurer currently in administration.

According to the Society, the broker’s letter states that ‘there remains the possibility that [Quinn Insurance’s] provisional administration will be either set aside or confirmed. In the latter event, Quinn would cease to be a qualifying insurer and its insured firms would have to seek cover from another qualifying insurer within four weeks’.

The Society said: ‘We do not think the position is as clear cut as the broker’s letter sets out and we would urge policyholders to await further developments and guidance before taking any action.’

The Society said it believes that ‘the making of the particular type of administration order concerned by the Irish courts under the particular piece of Irish legislation concerned is not a direct equivalent to an administration order made here in England and Wales', and as a result, ‘this does not automatically mean that an insolvency event for the purposes of the Solicitors Indemnity Insurance Rules has occurred’.

Normally, when an insurance company suffers an ‘insolvency event’ under the rules, such as provisional or full administration, solicitors are required to find alternative PII cover within four weeks.

The Society said that the type of administration order concerned ‘appears to be more akin to a regulatory intervention in a business and is intended to maintain the business as a going concern’, but said that the SRA will determine this issue. ‘Even if the confirmation of the administration order does amount to an insolvency event it may be open to the SRA to exercise its discretion to grant waivers of its rules,’ the Society said.

‘Firms will wish to keep these matters under careful and close review since, as [yesterday’s] events confirm, matters could move quickly. For our part the Society is constantly monitoring these matters and is in close contact with all appropriate stakeholders. We will be issuing more information and guidance to the profession (as will the SRA) as the circumstances require.’

Meanwhile, administrators are reported to be seeking permission from the Irish Financial Regulator to reopen parts of Quinn Insurance’s UK arm, but are not planning to re-enter the UK PII market, which is understood to have been loss-making.