Solicitors explore offshore insurance companies

City firm DLA established a captive offshore insurance company in advance of the professional indemnity renewal in September, it emerged this week.At least six other City and national law firms are exploring similar alternatives, to ditch professional indemnity insurance.DLA is thought to be the first firm to have created an offshore 'protected-cell' captive in advance of 1 September.Law firms must take the first 1 million of cover with an approved insurer, but make their own arrangements after that.Under the 'protected-cell' model, a law firm sets up its own insurance company, but can add further ring-fenced 'cells' to the company, enabling it to isolate different offices' potential losses.National firm Hammond Suddards Edge confirmed this week that it too considering a captive.

Insurance partner Edward Coulson is drawing up a report for the management.Trevor Moss, a director with indemnity broker Alexander Forbes, said a group of five additional City and national firms is discussing a similar scheme with him, by which they would create a joint offshore insurer, with protected cells for the individual firms.DLA's director of risk management Clive Pracy said the model 'enables firms to take their own risk on themselves and approach the reinsurance market directly'.He said DLA had put rigorous risk management procedures in place to restrict its liability.Mr Moss said that all Big Five accountancy firms have captive insurers and he expects more law firms will start to give the model serious consideration, especially in a rising insurance market.

By Jeremy Fleming