Insurer Chartis has said that it will not take on any new business in the solicitors’ professional indemnity insurance (PII) market due to the high costs of the Assigned Risks Pool.
The insurer said it will concentrate on renewals within its existing book instead.
The ARP is the insurance fund of last resort for firms that cannot get cover on the open market. It is funded by insurers, and has cost them £100m from 2005 to 2009.
A spokesman for Chartis UK said: ‘For some time, Chartis has been critical of the workings of the solicitors professional indemnity market.
‘In particular, we have been disappointed that the Solicitors Regulation Authority has paid little regard to the consultation responses they have received from insurers.
‘Specifically, Chartis advocated the immediate abolition of the ARP believing that the long-term sustainability of this market is best secured by insurers who are liable only for those exposures they elect to write.
‘In short, insurers cannot continue to bear unquantifiable levels of risk from legal practices that they elected not to trade with.’
He added: ‘Our analysis indicates that the transition from a recessionary economic environment may not be a smooth one.
‘This suggests continued poor claims experience in the market as a whole and the ARP in particular.
‘This, combined with limited changes to the minimum terms and conditions, and the continued presence of the ARP in 2011, mean that we have to address our position in this market.
‘Regretfully, Chartis has no alternative but to moderate the capacity it deploys in the sector and will not be writing new solicitors' business in 2011, preferring to focus on renewals within our existing book.
‘As a long term and major provider in this market we strongly believe that unless and until the structural flaws inherent in this market are properly addressed it will not be attractive to those providers who prefer a long-term commitment to the market with the consistency and stability that implies.
‘Solicitor firms and their brokers would be well advised to send their proposal forms in early to avoid difficulties in obtaining cover as the 1 October deadline approaches.’