The Solicitors Regulation Authority is planning to consult on allowing only rated insurers to provide solicitors with professional indemnity cover.
The regulator has long rejected calls to insist that insurers have a rating, but the position may now change after it discovered clients of law firms with unrated insurers did not receive necessary protection.
The SRA commissioned insurance broker Marsh to undertake a review of cover arrangements and protections regardless of the rating of PII providers.
The review was started after Latvian insurer Balva went into liquidation and Gibraltar-based Lemma collapsed in September 2012. Both were unrated insurers.
Agnieszka Scott, director of policy and strategy, said: ‘We understood the protections offered to clients were the same, regardless of who their solicitor was insured with.
‘Recent events however have made us look again at this issue to ensure that clients are protected. And we have been told that there may be inconsistencies, so we are proposing on insisting on a rating for insurers on the participating list.’
To be eligible to write compulsory professional indemnity insurance for solicitors, an insurer must be authorised by the Prudential Regulation Authority or be an EEA insurer passported into this country to write insurance business. The SRA said it has always deferred to the relevant regulatory bodies to vet the financial stability of insurers.
The issue will be discussed at the SRA board meeting on Wednesday and an eight-week consultation should start next month.