SOFT MARKET: continued decline viewed as 'unsustainable'


Professional indemnity insurance (PII) rates for the compulsory layer of cover have dropped by 5% for 2007/08, according to figures obtained by the Gazette.



Provisional figures collated by the Solicitors Regulation Authority (SRA) show that qualifying insurers collected premiums totalling £204.6 million this year - compared with £215.6 million for 2006/07.



Insurers have to declare their PII revenue yearly so the SRA can calculate each company's contribution to the assigned risks pool - the scheme that temporarily underwrites law firms unable to get cover on the open market. Insurers have until 28 February 2008 to declare their final figures.



Rates have continued to fall since the Solicitors Indemnity Fund (SIF), run by the Law Society, closed in 2001. The drop will alarm commentators who fear an economic downturn will provoke a spike in claims, adding further pressure on insurers competing in a soft market.



Zurich Professional remains the PII market leader, but its overall share has dropped from 20.5% to 18.7%. Alice Fleming, solicitor and claims manager at Zurich, said: 'We are pleased with where we ended up this year. We have always been about writing at sustainable premiums.'



However, she warned that falling rates would become 'unsustainable' at some point. AIG was second (14.2%), St Paul Travelers third (13.9%) and QBE fourth (13.3%).



Quinn Direct Insurance's market share has grown from 0.4% last year to 4.9% this year. A spokesman said: 'We believe that we can bring efficiencies to this market that will allow premiums to be as competitive as possible.'



Andrew Darby, head of professional indemnity at the SRA, said: 'The market is again very competitive. At some point the market will harden, but these figures do not give any indication of that happening yet.'



Anita Rice