The head of one of the biggest unrated insurers in the solicitors market has warned it may not secure a rating in time for the renewal period.
Jason Smart, chief executive of Elite Insurance, said it was likely but not guaranteed the firm could secure a rating this summer.
Elite currently provides insurance for 1,046 solicitor firms – mainly smaller practices – and is one of those affected by the SRA’s plans to insist that all PII providers have at least a B-plus rating.
The extent of the impact on high street firms was outlined by a Law Society survey this week which found almost a quarter of small firms are currently with unrated insurers.
Speaking exclusively to the Gazette, Smart said costs will inevitably rise if unrated insurers are banned and said his firm was being ‘tarred’ with the same brush as unrated providers who have collapsed in recent years.
Smart (pictured) said: ‘Firstly, we don’t know whether we are going to have a rating in time for the renewal period. If the rating agency takes longer we will not have a rating that may be the requirement by 1 October.
‘The second thing is it was never suggested the requirement would be a B-plus rating. The chances of us getting a B-plus at the first application we don’t know. There is no guarantee we will get it at the first application.
‘The problem we have at the moment is this whole concept of rated insurers only allowed to participate from October with a B-plus rating. It leaves all these law firms high and dry.’
Smart, whose firm has around 10 years’ experience in the solicitors market, said regulators need to dig deeper into insurers’ viability rather than rely on a rating.
‘The people making the decisions on these types of rating are incapable of distinguishing good insurers from bad,’ he said.
‘You should look at the balance sheet, cash profile, expertise, infrastructure and client base. That is what should be happening, not the lazy way it’s being done.’
He explained that the application for a B-plus rating is likely to cost the firm up to £100,000 – with the costs having to be added to premiums.
Costs may also rise if unrated insurers have to find a ‘fronting’ arrangement with a rated insurer to cover them while they wait for a rating.
The SRA has finished consulting on plans to ban any insurers without a minimum B rating from the solicitors market.
In its consultation paper in March, the regulator said its proposal ‘provides the best balance between providing additional protection for consumers and minimising any negative impacts on consumers and law firms’.
A decision is likely to be made at the board meeting on 21 May.