Law firms appear to have shopped around more in 2012 than in previous years as they spent £240m on professional indemnity insurance.

The leading three insurers’ share of the market fell from 43% to 38%, according to figures released by the Solicitors Regulation Authority today. XL Insurance was again the busiest firm in the PII market, underwriting 16.5% of all business. This was down from 18.3% in 2011.

QBE and Travelers Insurance each captured 10.9% of the 2012 market, with the latter ousting Hannover from the leading three participants in the sector.

A total of 22 insurers from the SRA’s Qualifying Insurer list secured business, although the total value of the market fell by 6% from £255m to £240m. Just 20 firms entered the assigned risks pool (ARP), having not been able to secure insurance on the open market.

The relatively low figure - a 37.5% drop on 2011 - will come as a relief to the Law Society, which had agreed to fund half of the ARP costs from this year.

Richard Collins, SRA executive director for policy, said: ‘The changes ensure firms have PII in place that provides the required level of consumer protection.

‘We have also ensured there is a sustainable market for the long term by creating a competitive and open insurance market. We have implemented this in a phased way over a number of years to ensure a smooth transition and maintain stability.’

In October 2013, the ARP will be replaced with a system where insurers offer a three-month extended policy to firms which cannot obtain PII for the following year. A firm may continue to practise while attempting to obtain a policy for the first 30 days of this extended indemnity period.

For the remaining 60 days - the cessation period - firms may work only on existing instructions while attempting to find insurance, or conduct an orderly closure if insurance is not obtained.