The US Government’s $85bn (£48bn) bailout of insurer AIG has averted a catastrophe in the volatile solicitors’ professional indemnity insurance (PII) market, brokers have said.

However, some reported that a minority of clients remained wary of obtaining AIG cover, and that the period between AIG’s share price slide and subsequent rescue had led some firms to switch insurer.

AIG’s share price fell last week after its ratings were cut by independent agencies Standard and Poor’s, Moody’s and Fitch. The ratings were unchanged as the Gazette went to press.

Tony Blyfield, chief executive of PII broker Prime Professions, said: ‘It could still have an impact on the market because, inevitably, AIG will have lost some solicitor-business. But many firms have taken the view that they’re now effectively insured by the US government, so they’re quite happy.’

Lex Baugh, chief executive of AIG UK, said: ‘It is now very much business as usual at AIG. Our ability to trade is undiminished and AIG UK is generating significant positive cash flow. We still retain a high financial strength rating. We have £900m in capital to meet policyholder obligations, in excess of the required minimum.’

Four insurers have either pulled cover for small firms or exited the PII market this year.

(See City column)