Cash-strapped law firms are seeking emergency loans to pay for hiked professional indemnity insurance (PII) premiums, amid claims that many insurers are tightening their payment terms.

Independent finance providers Syscap and Key Business Professions (KBP) have reported a recent surge in the number of firms asking for help in paying lump sum PII premiums. Mark Gidge, chief sales officer at Syscap, said that the company has noted a general increase in financing requests as well as a ‘marked increase’ in requests from larger firms.

Nick Pointon, managing director of insurance broker PYV, said that insurers are making sure they are guaranteed payment before they issue cover. Nick Sanders, managing director at KBP, said that more insurers are asking for lump sum payments rather than allowing payments to be spread over the year. Syscap’s Gidge said that some insurers have become reluctant to offer the traditional payment holidays to law firms in a bid to speed up their cash collection.

The news comes after hefty premium increases were predicted for small firms on the back of a rise in professional negligence claims. According to City firm Reynolds Porter Chamberlain, 80 professional negligence cases were heard against lawyers in the High Court in 2008, up from 31 in 2007.

Pointon said solicitors should already be looking to ensure they have the necessary funding in place. He also recommended that firms undertake a stringent review of their risk management procedures to meet strict requirements being set by insurers this season.