Hundreds of firms face a race against time to secure professional indemnity insurance (PII) in a market where prices are up to 40% higher than last year.
Over 1,000 customers of unrated PII insurer Berliner received letters last week urging them to find alternative cover.
Many of them had transferred this month from troubled Latvian firm Balva – and now have just two weeks to find cover before the 1 October renewal date.
Market experts warned that firms will find premiums have risen now the market has lost capacity, while underwriters will want proof that firms have a sustainable business model in the light of potential income cuts.
Philip White, chief executive of law firm funder Syscap, said: ‘There’s a real danger that some smaller firms could find themselves with no realistic option at all. With the October renewal deadline fast approaching, there is potential for this year’s PII renewal period to cause business-critical problems for a significant number of firms. If they can’t afford PII cover, they will be forced to wind up their business.’
John Kunzler, head of UK regulated professions for broker Marsh, said prices were volatile even before the Berliner news, with some firms being quoted up to 40% higher premiums than in 2012.
Firms reliant on areas such as legal aid, personal injury and conveyancing can still secure cover, he said, but they will face increased scrutiny this year. ‘You have to demonstrate you’ve adapted to change: underwriters want to hear your business case,’ added Kunzler.
Sandra Neilson-Moore, head of large law firms at Marsh, said a two-tier market has now been created, with smaller firms struggling to secure cover but the top 100 able to present themselves as low-risk and make insurers compete for their business.
For the first time this year, the assigned risks pool is no longer an option for firms that cannot find cover on the open market.