PII renewal: the insurance issues facing law firms

PII renewal: the insurance issues facing law firms

By Frank Maher

Solicitors in England and Wales will be renewing their compulsory insurance on 1 October 2013. This will be the last year that the date is cast in tablets of stone, and some may renew for more than one year in order to move away from the date which the rest of the profession may continue to adopt through inertia. What will the renewal season be like, and what other issues are emerging in relation to cover?

Insurers of US firms have encountered a sustained run of large claims with some very significant loss ratios, though the number of circumstances notified is down. Experience in the UK in the past couple of years has generally been significantly better. The primary limitation period for lender claims arising from the economic woes of 2008 is gradually approaching, and whether or not this flushes out a large number of claims will have a significant impact on the future.

With that said, I expect no significant difficulty for the majority of large firms renewing cover. However, the position may not be so rosy for small firms. The breadth of compulsory cover has made many an unattractive risk for established insurers and thrust many into the arms of the unrated market. While being unrated does not necessarily indicate that an insurer is unable to meet claims, given the long term nature of solicitors’ professional indemnity, more so than other professions, it puts premium-paying buyers on enquiry. However, although the Law Society has published advice on Financial Security of your PII insurer and cautioned solicitors against buying from unrated insurers, the reality is that many have no choice, other than to close down.

The position is exacerbated by the situation involving Balva which arose after our last Risk Update.  Balva insure 1300 firms. Their Latvian regulator has barred them from writing further business in the UK. There is no suggestion that they are insolvent, but I have yet to see any evidence that provides reassurance for the long term. The econo

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About the author:

Frank Maher is a practising solicitor and partner in Legal Risk LLP. He specialises in advising major US, European and UK 100 law firms, their insurers and other professions on professional regulation and professional indemnity. His practice covers transactional advice, litigation and disciplinary proceedings. He is advising a number of practices on regulation as Alternative Business Structures under the new regulatory regime in the UK which permit non-lawyer investment and involvement in law firms.

Frank has a diploma in Anti Money Laundering from the International Compliance Association, accredited by the Business School of the University of Manchester. He also has a Practitioner Certificate in Data Protection.

Frank is author of Risk and Compliance for Law Firms in a Changed World and co-author with Sue Mawdsley of The Money Laundering Reporting Officer’s Handbook: A Guide for solicitors. He is also a contributor to Ark Group’s Future of Legal Services Report.

He has 28 years’ experience of defending many of the largest law firm claims for insurers. His claims experience includes many involving fraud issues in the UK and elsewhere, property, undertakings, financial services and consumer credit.

He has advised City firms and many other practices on dealing with compliance and insurance aspects of rogue partner and employee issues.

He is also a frequent contributor to the legal and insurance press and a regular speaker at events worldwide.


Legal Risk LLP is a UK law firm whose clients include six Am Law 100 and ten Am Law 200 firms, many of the leading European and UK law firms and US and UK insurers on professional regulation, risk management, anti-money laundering, and professional indemnity. The partners’ combined experience covers a wide range of commercial, banking, insolvency, anti-money laundering, professional indemnity insurance and disciplinary and compliance issues. The firm is frequently instructed in the insurance aspects of law firm mergers.

Legal Risk is recommended by Legal 500 and Chambers and Partners for professional indemnity and professional regulation, and was winner of the Law Society’s Gazette Centenary Award for Excellence in Risk Management.