Firms struggling to find insurance cover in difficult market conditions will be given the usual three months to save themselves or prepare for closure, the Solicitors Regulation Authority has confirmed.
The regulator’s updated guidance on how firms can respond to the coronavirus pandemic states that firms who cannot obtain a new policy will go into the extended indemnity period. This effectively gives them an extra 90 days under their existing policy to either obtain alternative cover or close.
If a firm does not obtain a new PII policy before its current policy expires, the firm’s last insurer is required to extend cover for a further 30 days under the EIP. During this time the firm can continue working as normal while trying to find alternative cover.
If the firm is unable to obtain a new policy within this EIP, it has a further 60 days of the CP to plan to close in an orderly fashion (or attempt to be taken over or merge with a successor practice).
Insurers have reported publicly for some time that the PII market is hardening, with premiums rising as a result. The SRA says insurers’ focus is likely to be on renewing existing business rather than taking on new work, while some broker are experiencing delays in their operations because of the virus and lockdown.
The Law Society today published guidance to help firms seeking to renew insurance, which includes advice on what to do if an insurer goes insolvent and how to make proposals more attractive to insurers.
The advice offers details for accessing the coronavirus business interruption loan scheme, which may free up resources to pay for PII.
If firms cannot contact their usual broker, they are advised to contact an alternative, and the Society has compiled a list of brokers with good market access who are ready to work with solicitors.
Simon Davis, president, said: ‘We have been working with our members, the SRA, brokers, and insurers to ensure a better understanding of the current PII market, and how members can best be supported.
‘We are investigating regulatory responses, and signposting government-backed and private sector facilities, that could assist firms struggling to meet the cost of premiums. These may now be substantially higher than expected, at a time when cashflows have suddenly become far less certain.’