The Solicitors Indemnity Fund (SIF) was formed in 1987 and provided professional indemnity insurance (PII) for solicitors through a mutual fund. 


Nick Gurney-Champion

By the late 1990s, many in the profession argued SIF premiums were too high, with larger firms subsidising smaller. It was suggested a market solution would be cheaper, and the profession voted to close SIF and obtain PII on the open market.

SIF was put into run-off and closed to new entrants on 1 September 2000. Firms closed before that date were told they would get SIF coverage indefinitely, which remains the position. This does not apply to firms closing subsequently and never has.

By 2004, SIF had considerable reserves; more than needed for claims of the firms closed pre-September 2000. So, the Law Society decided some of this would be used for post six-year run-off cover (PSYROC) for the firms which closed without a successor practice after 2000. It was also decided this additional cover would continue for claims notified before September 2017, at which point SIF was expected to close.

In 2007, the Legal Services Act (LSA) split off the Law Society’s regulatory functions into the Solicitors Regulation Authority.

The LSA defines indemnification arrangements – including SIF – as regulatory functions, and internal governance rules (IGRs) bar the Law Society’s involvement. This severely limits how the Society can respond to the impending closure of SIF. And despite the recent extension, it still is impending.

As stated previously, when the Society first arranged for SIF to provide PSYROC to firms that closed post-2000, the fund was due to close in September 2017. In 2013, the Society successfully lobbied the SRA to postpone the closure of SIF until 2020. In 2016, the Society again invited the SRA to extend the closure of SIF until September 2023, but this time the request was rejected.  

Since taking over as chair of the PII Committee almost three years ago, I have had the potential closure of SIF as top of the committee’s agenda. For almost two years, I and staff from the Society’s policy and commercial teams have been in discussion with brokers and underwriters to see if there was an appetite for a market solution to fill the gap caused by SIF’s closure.  

Although there were some initial encouraging noises, as we got closer to the September 2020 deadline, with the insurance market hardening, it became clear there was little if any appetite for a commercial SIF replacement.

I made my concerns on this known to the Society’s chief executive, and the chair of the board, and in early 2020 a SIF Working Group was set up to address this issue.  

It has met regularly since. In about April of last year, the Working Group agreed that, from the evidence we had obtained, a SIF replacement in the market was not going to happen, and with Covid limiting the ability of retired members to obtain alternative cover, the closure of SIF was going to be impossible.

Therefore, a further request was made to the SRA to postpone the closure of SIF for another three years. The SRA board considered this request and, I think reluctantly, agreed to extend it for a further year until September 2021. They believed a longer extension was unaffordable.

Over the last 12 months, we have continued talking with the insurance industry, hoping to find a commercial solution the Society could recommend to its members. Some interesting suggestions have been made but nothing definite.

At the same time SIF Working Group took advice from counsel about the Society’s position under the LSA and IGRs. We wanted clarity on what we could do about SIF and indemnification more broadly. Counsel confirmed:

1. The Society itself cannot carry out indemnification arrangements for its members.

2. Decisions about SIF are the sole domain of the SRA.

3. In exercising its regulatory functions, the SRA must act reasonably and rationally, in a way which is compatible with LSA objectives.  

In March 2021, the Society wrote to the SRA asking them to explain fully their actions in accordance with the requirements of the LSA. There has been no substantive reply.

Around four months ago, I and Society staff met with the Legal Services Consumer Panel (LSCP) to apprise them of the situation. They were rightly horrified, and indicated they would raise this with the LSB (of which they are an independent advisory arm) and the SRA. Around seven weeks ago, our president, I. Stephanie Boyce, had a follow-up meeting with the LSCP, and in early June a joint letter was sent to the SRA, setting out our shared concerns for consumers and for members, and requesting a postponement of SIF’s closure.

In late May and early June, conversations took place with the LSB, which is now taking an active interest in our concerns.  

The SRA board met on 8 June to consider our request for a continuation of SIF. We also asked them to consider handing SIF over to the Society, and assist in dealing with regulatory constraints. On 15 June the SRA announced a delay to the closure of SIF until 30 September 2022. Furthermore, they indicated they now regarded PSYROC as a regulatory issue, and would launch a public consultation on next steps including:

  • whether PSYROC should be regulated;
  • other comparable run-off cover arrangements;
  • finding a balance between consumer protection and issues of proportionality, affordability, and the wider public interest; and
  • the viability of possible options, (including discretionary use of the SIF surplus as a hardship fund).

The Society is now conducting discussions with members and insurance industry figures to identify viable solutions, which we will share with the SRA’s consultation. We want an adequate, affordable solution, sustainable in the long term, but we remain open-minded about how this is accomplished.

The SRA is expected to launch its consultation immediately after the October PII renewal. It is essential all those that have an interest in PSYROC (which in my view should include every solicitor) responds.


Nick Gurney-Champion is chair of the Law Society’s PII Committee