Indemnity rates to rocket

PREMIUMS: massive rises on cards for firms with bad records and those seeking top-up

Solicitors face hikes in indemnity insurance premiums of up to 100% or more, especially those seeking top-up cover, industry insiders told the Gazette this week.

The speculation comes as solicitors look to renew their policies before 1 September after a hard year for the insurance market.

It began with the 11 September terrorist attacks on the US and culminated in corporate fold-ups at Enron and Worldcom.

Ceri Welch, professional indemnity product leader with Royal Sun Alliance, predicted premium rises of between 50 and 60% this year, with higher rises for those firms which have incurred more than average claims in the past year.

Jonathan Davies, product manager for solicitors' professional indemnity at market leader St Paul, said: 'We expect to see rate rises across the market of between 20% and 50%.'

But Mr Welch and others said that firms looking to insure themselves above the compulsory 1 million will face steep rises - up to 100% in the cost of cover, especially on excess layers above 10 million.

Peter Farthing, a partner with City firm Clyde & Co and chairman of the Law Society's indemnity insurance committee, said: 'Talk of huge premium increases are often indicative of insurers talking the market up.

We have created a free market in insurance.

But it is up to solicitors to use it by shopping around.'

Meanwhile, after several insurers dropped out of the market in recent months, two companies are joining this year.

American Re is set to underwrite a total of 15 million in the market, which would make it the fourth largest insurer, and Newline, a Lloyd's syndicate, will also offer indemnity insurance to solicitors for the first time.

Newline will use HSBC as a brokerage service.

l Former Solicitors Indemnity Fund and Zurich Professional managing director Liz Mullins has joined Aon Professional Risks (Aon's newly launched professional indemnity business) as executive director and practice leader for UK law firms.

Jeremy Fleming