The Solicitors Compensation Fund looks set to receive a £5m boost to its reserves which could ease the financial pressure on individual firms, under plans being put forward at the Solicitors Regulation Authority’s board meeting today.

However, in a separate development the SRA has concluded that it is ‘not realistically possible’ for it to reduce professional indemnity insurance (PII) premiums for firms stuck in the assigned risks pool (ARP) this year.

The £5m cash injection into the compensation fund would come from the SRA’s statutory trust fund. It is expected to be used to minimise the increase in compensation fund contributions that solicitors will face in 2011 because of a rise in claims against the fund.

The SRA currently holds around £8m in a statutory trust account. The funds have accrued from practice monies which could not be returned to beneficiaries after the SRA intervened in a firm. Around £5m of the trust account is eligible to be transferred to the Solicitors Compensation Fund initially, with further transfers likely in the future. The compensation fund’s cash reserve currently stands at almost £50m, and it paid out around £10m in the year to 30 June 2009.

Any decision on whether to use the £5m cash injection to ease solicitors’ compensation fund contributions would be for the Law Society council.

Law Society group finance director Rona Chester said the transfer would not affect the practising certificate fee but would enable the SRA to ‘maintain the level of contributions [to the compensation fund] against an increased level of claims and interventions’.

Meanwhile, the SRA has ruled out lowering the cost of premiums for firms in the ARP after it was asked to consider the possibility by Chancery Lane in September. There are currently around 342 firms in the pool, up from 256 last week.

Andrew Long, chairman of the SRA’s financial protection committee, said: ‘The ARP premium rates for the indemnity year, which began at the start of this month, were fixed many months ago. They are contained in rules made under statute and in a set of contracts made earlier this year. It is not realistically possible to now change those rates. To do so would entail both retrospective rule making and the consent of numerous contracting parties to change, to their disadvantage, existing contracts.

‘Solicitors who have not yet obtained market cover can still do so. If market cover is obtained before the end of November, and if the insurer agrees, insurance can be backdated to 1 October, thus enabling such firms to leave the ARP. If a firm is able to secure cover in the market but with an inception date after 1 October 2009 then the firm will need to effect an ARP policy for the period from 1 October 2009 to the inception of the market policy. In those circumstances the ARP would adjust the premium in accordance with the rules and the firm could also apply to the SRA for a waiver to further reduce the ARP short period premium.’

The ARP is the insurer of last resort for firms unable to buy PII from commercial insurers.

A Law Society spokeswoman said solicitors having difficulty obtaining cover should call its helpline on 020 7320 9545 or email PII@lawsociety.org.uk.