Deadline day: 1 September 2001.

All law firms in England and Wales were required under Law Society rules to have renewed their professional indemnity cover on the open market.Last year a late rush ensued with law firms desperately obtaining cover just before the deadline.

But lessons have clearly not been learned.Paul Cusition, general manager of St Pau l International, London -- the market leader for solicitors' professional indemnity -- says firms have left it very late to obtain cover this year, despite the risk of being dumped in the dreaded assigned risk pool (ARP), at huge extra cost, if they miss the deadline.Mr Cusition says: 'There has been a lot of pain, lack of sleep and frustration: they have left it even later this year than last year.'It may be because last year it was an unknown market.

They didn't know if their premiums were going to go up or down or stay the same.

This year we got all the quotes out by 1 August.

People have been sitting on them for three weeks.'He says that nothing has changed: those who used to provide top-up cover when the Solicitors Indemnity Fund (SIF) was still operating found the same attitude.

As in the SIF's time, all law firms are required to get £1 million minimum cover although many acquire substantially more, with £300 million worth not being uncommon, according to Mr Cusition.He describes the ARP as 'an intensive care unit'.

It covers firms if they cannot obtain indemnity elsewhere -- but only for two years.

After that, if they cannot obtain insurance on the open market or find someone to take over the firm, it must be dissolved.

Since last year between 30 and 40 firms have been in and out of the pool.A Law Society spokeswoman says: 'It's impossible to say for sure but early indications are that all firms will still be able to get cover.

We haven't had lots of firms phoning us saying they are worried about it as we did last year.'As part of its joint venture with the Law Society, St Paul is required to provide cover to all firms -- although the ARP responsibility is split between all the companies that provide insurance to the profession.Mr Cusition says: 'It's an insurer of last resort.

You're in there for two principal reasons: because you're effectively uninsurable or, if you don't bother to do anything, you are deemed to be in the ARP by default.'The premiums charged are substantial.

We're talking 25% of the annual fees - which is punitive -- with additional costs coming from having to be monitored and audited by the Office for the Supervision of Solicitors, which can attach conditions.

There is a real incentive to get out of there.'Anson Game, head of Pinsent Curtis Biddle's insurance and reinsurance group, says: 'It was surprising to some that so few found themselves in the assigned risk pool.

It will be interesting to see what happens this time round.

Insurers may be looking at renewal in a less generous way.'Mr Cusition says the profession saved £100 million on indemnity cover last year compared with the final SIF contributions demanded in 1999.

But Mr Game is sceptical.He says: 'I've heard of this so-called saving but I'm not sure if it's a fair comparison.

The SIF was going into run-off -- it's different from being an on-going insurer.

The profession most likely gave wholesale notification of circumstances.

The SIF may have taken that into account along with other concerns -- for example about Y2K -- when assessing contributions for its last year.

Those anticipated claims may not yet have become actual ones but the potential remains.'Many law firms are cagey about whether their premiums have risen or fallen this year, but indications are that overall the profession will see a rise in premiums this year.Tine Thorsen, marketing manager of Zurich Insurance -- which currently has 20% of the market -- says: 'We are not increasing rates across the board -- some will go up and some will go down.

If you loo k at that on average, there will be 10% on premiums compared with last year.'She says the rises are caused by many factors, including claims information coming in, and a change in the formula used to assess personal injury awards.Mr Cusition says: 'Firms will notice quite a difference in renewal price compared to what they saw under the SIF, which existed with quite a restrictive claims criteria.

New partners or claims being made are all risk factors that will affect the premium price in a way they wouldn't under the SIF.'He says it is hard to say whether any particular sector of the profession has seen an increase this year since all firms are assessed individually.However, Mr Game, says that historically conveyancing has caused a large number of claims but since we are in a time of relative economic growth, it is more likely to be commercial conveyancing which generates more claims, as opposed to residential.Recent figures from broker Alexander Forbes, using figures of claims notified from a cross-section of almost 1,500 firms insured by eight insurers, back this up (see [2001] Gazette, 19 July, 1).

These showed that the percentage of residential conveyancing claims notified for the first six months after the SIF's break-up was 19% -- compared with 29% for 1999, the last year for which figures are available.

However, commercial conveyancing claims almost doubled from 9.5% in 1999 to 18%.Mr Game says: 'It may well be that it is the smaller and medium-sized firms with commercial arms advising medium-sized enterprises that will face more claims in future than small high-street firms.'Alexander Ulm, a partner in City firm Reynolds Porter Chamberlain's professional liability group, predicts that this year's premiums may come as less of a shock than next year's.He says: 'The general view is that this year most firms will continue to have fairly favourable rates offered to them because the insurers are still trying to get a share of the market and have had a quiet time on claims.'The insurers have had a honeymoon period in that all law firms had to notify any potential claim before September last year.

Therefore, most of the claims that have arisen have fallen on the SIF.'As Mr Cusition explains, most of the ex-members of the SIF are still employed to handle the run-off, managed by St Paul under its joint venture with the Law Society.Mr Ulm adds: 'From what I heard, there is expected to be a jump in premiums next August.'This honeymoon period, he says, is one of the factors affecting the amount of work being outsourced to external law firms by the insurance companies.

Reynolds Porter was on the SIF's panel of lawyers and is now on the panels of several insurers.He says: 'As I understand it, not a lot of work is coming out of the new insurers at the moment.

Most of the big insurers have substantial in-house teams and their aim is to keep most of the work in-house.

Each claim they have to send out to a panel firm is seen as a failure.'Some law firms have benefited on the work front from the demise of the SIF.

Rob Wotherspoon, a partner at City-based Kennedys, says: 'It's good for us because we now act for some of the commercial insurers offering solicitors' professional indemnity, whereas we were not involved in the SIF panel.

We receive notification of claims and deal with them as appropriate.'Mr Ulm says there is little difference in the way the SIF and the insurance companies deal with claims, although Mr Game points out that the insurers have emphasised a spirit of co-operation with the insureds to handle claims efficiently and effectively.One thing is for certain, it is a cut-throat market out there.

Mr Cusition says: 'I can hardly put enough emphasis on how competitive it is.

It's quite frantic.

This is a big chunk of premium that comes available in a short period and there is substantial competition.'Although a similar number of companies have registered with the Law Society to be allowed to provide insurance this year, Mr Ulm predicts that some will drop out.

In July, Saturn Professional Risks closed its doors to new business except sole practitioners, saying premiums were too low.

Many of the 35 or so insurers write a very small amount of business.Mr Ulm says: 'Some who have dipped in will now dip out because they will find it insufficiently profitable.

If they get a relatively small share of the market with relatively small premiums and they get one or two uncomfortably large claims, they will be out of pocket.'