The surplus generated by the Solicitors Indemnity Fund (SIF) could top £100 million, it emerged last week after the Law Society Council voted to return £50 million to law firms in England and Wales.

The council decided - by 57 votes to 16 - to refund contributions made in 2001/2 and 2002/3, the fourth and fifth years of the planned seven-year collection of the £454 million shortfall in the SIF uncovered in 1997.


It also agreed to amend the Solicitors Indemnity Rules to allow a wider range of options for dealing with the balance.


The board of SIF is meanwhile in talks with an unnamed reinsurer about entering into an adverse development loss programme.


Such a move would bring finality to the SIF's exposure to adverse developments and could crystallise the surplus at a net sum of more than £80 million. If the reinsurance programme is given the green light, the bulk of the balance would become available in late 2005.


Describing the surplus as 'a win-win situation,' Fiona Woolf, the Law Society's Deputy Vice-President, said: 'The balance might be in the order of £50 million, maybe even more.'


Ms Woolf, who chaired the working party that recommended the refund to council, added: 'It is possible that the SIF may do a deal with a reinsurer. Or it may decide that [this option] is too expensive and will leave the fund to wind down all its activities. When it has seen off the last claim, the balance will be handed over to the Law Society.'


As the SIF is a statutory fund, contributors do not have any legal entitlement to the surplus.


The working party recommended that it should be left to firms to sort out how any return is to be divided up between the original contributing principals.