The Solicitors Regulation Authority has sought to reassure hundreds of law firms using Balva for professional indemnity cover after the Latvian company was placed under new restrictions.
The Financial Conduct Authority has updated its register following a decision by Latvian regulators to prohibit Balva from writing any new business, effective from 1 March. But the SRA has said this restriction does not affect existing policies, so there should be no implications for around 1,300 law firms that use Balva.
The firm captured almost 7% of the solicitors’ market for 2012/13, despite being an unrated insurer, according to the Law Society’s PII guide.
In a letter to affected firms, the SRA states the restriction does not affect Balva's obligation to provide cover for up to 90 days after 30 September if firms cannot renew their insurance, nor does it affect the provision of run-off cover if a firm closes without a successor practice.
Firms will not be able to obtain additional policies from Balva while the restrictions are in place, so the SRA advises they may need to seek an alternative provider from 1 October.
Agnieszka Scott, SRA director of policy and strategy, said: ‘While nothing is certain, we felt it necessary to write to firms to allay any fears they had over their cover. The restriction is only on new business, so firms do not need to be concerned at this time.
‘We are in regular contact with the Financial Conduct Authority and will continue to keep our eye on the Balva situation over the coming months.’
A recent survey of the legal profession found around 16% of practices – including almost a quarter of sole practitioners – ignored warnings about unrated insurers when choosing where to buy cover last year.
The Law Society had warned firms in the lead-up to the renewal date to check insurer solvency following the financial collapse of two insurers, Quinn and Lemma.