Unrated insurers could be barred from the solicitors professional indemnity market by October 2014.
The Solicitors Regulation Authority today confirmed it is reviewing the risk to clients when insurers get into financial difficulties.
The decision follows the collapse of unrated Latvian insurer Balva, which provided cover for around 1,300 law firms.
The SRA has previously deferred to financial regulators to decide if insurance firms are eligible to write indemnity insurance.
Unrated insurers are currently allowed to enter the market, but that stance may now change after the SRA’s standards committee initiated the review.
Agnieszka Scott, SRA director for policy, said: ‘There have been numerous calls for us to allow unrated insurers only, but we have resisted this restriction as it would be an unwarranted barrier to entry into the solicitors PII market. Until now, it would have been disproportionate for us to introduce a financial rating criteria.
‘However, in the light of the insolvency of Lemma last year and recent developments with Balva, we decided that we need to look again.’
The review will be complete in time for any decisions to be made for the indemnity period starting on 1 October, 2014.
The SRA has already agreed to change its list of insurers from qualifying to participating insurers. Suggested by the Law Society, the move was to remove any understanding that insurers had been vetted by the SRA.