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Posts Tagged ‘SRA

Client financial protection arrangements

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The SRA are seeking your views on our proposals for amendments to our client financial protection arrangements.

The key changes proposed for October 2011 are

  • to remove the restriction of the single renewal date,
  • to permit the exclusion of cover for claims arising from work done for financial institutions from the minimum terms and conditions,
  • to limit the amount of time a firm can stay in the assigned risks pool (ARP) to six months, and
  • to clarify the requirements on insurers to provide information to the SRA regarding firms that fail to pay their premiums or may have misrepresented information.
  • Options for discussion for October 2012 or beyond include

  • permitting additional exclusions of corporate clients from the minimum terms and conditions, over and above the proposed exclusion of financial institutions;
  • changing the role of the ARP, possibly by ending its role as a provider of policies of qualifying insurance completely, thereby limiting its role to the provider of client protection to firms that do not have professional indemnity insurance;
  • altering the way in which the ARP shortfall is funded, by considering either a direct levy on the profession or a levy as a percentage of insurance premiums;
  • considering whether the functions of the ARP that remain and those of the Compensation Fund could be combined into the Compensation Fund;
  • considering whether insurers should be able to cancel policies for non-payment of premiums, fraud or misrepresentation in information provided by the firm to the insurer.
  • The deadline for responses to this consultation is 28 February 2011.

    To take part or to find out more, visit www.sra.org.uk/consultations

    Written by Andrew Hodges

    December 14, 2010 at 4:24 pm

    Posted in Comment, LinkedIn

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    PI Market has a new player

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    The Gazette story tells of a new player in the PI market. Not entirely new to the UK market place they will be a welcome addition for some firms.

    Written by Andrew Hodges

    July 25, 2010 at 9:49 pm

    Posted in Comment, Compliance, LinkedIn

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    PI Insurance Market

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    The renewal date for firms Professional Indemnity policies looms and we find ourselves, as a profession, facing one of the most uncertain times since the introduction of the ‘open market’ insurance provisions.

    CAPITA HIGH RESERVE
    Year 28/04/2010
    2000 – 2001 £140,779.50
    2001 – 2002 £42,000.00
    2002 – 2003 £349,804.00
    2003 – 2004 £437,535.00
    2004 – 2005 £29,036.68
    2005 – 2006 £2,423,769.00
    2006 – 2007 £4,395,729.50
    2007 – 2008 £6,079,269.33
    2008 – 2009 £55,286,643.10
    2009 – 2010 £5,673,530.00

    Of course the one thing it is not is an open market and this year it is proving to be a very restricted market. Last year we saw an increase in the number of firms being forced, if that is the correct phrase, into the assigned risk pool. Looking at the table above you can see that in just 10 years the reserve in the ARP has grown from a figure of £150,000 to over £5.6 million. In the previous insurance year it reached an astounding £55m and the potential growth this year is not just from higher demands arising out of property markets and commercial claims but the restricted volume in the market place. You have to believe that the life of the ARP is limited and with the debate around indemnity insurance and ABS’s I would not be surprised to see changes in the near future.

    We have seen insurers such as Quinn exit the market due to financial difficulties but it would appear that there are a number of others looking to either restrict their book or close it all together to certain types of business. American backed insurers are questioning the profitability in the UK market and wondering if this will be their last year and the larger players such as Zurich and Travelers, who between them hold 25% of the market measured by premium, are said to be moving away from the lower end of the market place. If this is the case and Quinn are no longer present then smaller firms of 1 to 4 partners may just find that their market place has shrunk by 35%. Add to this the losses that have been suffered in the past two years by RSA and AIG, which will surely influence their book. Consider insurers like Hiscox whose entry into the market is always late and uncertain. Then you have a distinct reduction in capacity with no real apatite to take up the slack from the remaining players. New entrants into the market are few and far between. Allianz having set their stall out last year for £10m and filling it with what they believe to be good quality risk I believe don’t have an appetite for further growth and are probably the most successful new player. Other entrants are looking to fixed and closed schemes and the enthusiasm for off shore funds has waned. There is little hope of a new large entrant.

    I am sure that companies like AIG writing a £36.5m book will continue to operate in the market but premiums are bound to firm up and those with poor records or inadequate risk management systems would do well to enter the market now. Smaller firms may, again this year, find it very difficult to attract cover at the lower rates they are used to and any rise on top of the already increase prices from the 2008 market may prove to be the last straw for a number of these firms.

    Written by Andrew Hodges

    July 13, 2010 at 6:37 pm

    Posted in Comment, Compliance, LinkedIn

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    Open consultations

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    The LSB consultation process has begun and I believe it is important for the industry to be a part of this. We do actually have an appalling track record for taking part in these papers and it is to our detriment. If you flip back to your copy of the Clementi Report and look at how many solicitors are listed it is but a handful (yes I am there) but we are all quick to moan that nobody asked our opinion.

    The documents are here and I think they should be serious holiday reading, yes I have a life. They may even be more interesting than the autobiography that some aged aunt bought for you.

    Interesting they published these at Christmas! Or is it just me?

    Written by Andrew Hodges

    December 11, 2009 at 4:16 pm

    Posted in Comment, LinkedIn, New Law

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    A TUPE Issue at the LCS

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    Interesting argument brewing with the government. I will let you read the attached article from The Gazette for the detail. I hesitate though to make the comment that we have seen several reincarnations of this service each time with the same staff and different leaders. Each time the service has failed. Time for a change, of staff?

    Written by Andrew Hodges

    December 10, 2009 at 8:59 pm

    Rule 9 and a change in the guidance.

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    I have seen this note in The Gazette recently which if you have not seen may be of interest to you practicing lawyers.

    Written by Andrew Hodges

    December 4, 2009 at 11:39 am

    Posted in Comment, Compliance, LinkedIn

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    Move to scrap the assigned risk pool

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    The scrapping of the assigned risk pool does nothing for the debate on the Professional Indemnity Market. The fact is that the whole process is flawed.

    Whilst the articles in The Gazette raise some interesting points, even some crucial ones if you believe in the need for diversity of firms in the legal market. They don’t seem to address the fact that the problems in the market are much of the professions own making. Why have we:

    • A single expiry date. This means that the market is inundated with proposals at one point in the year and the insurers are able to assess the market in one easy comparison making the market into ‘one book’ at one glance.
    • A complete lack of understanding amongst the majority of solicitors that you need to sell yourselves to the underwriters. The insurance market needs to know of your commitment to risk management, training and the way in which you conduct your business. If not I think they are entitled to believe that your firm is just one of many.
    • Not realised that the brokerage system does not work for solicitors. There are only really a handful of good brokers in the market who have direct access. Yet solicitors continue to deal with their local broker who then has to refer it onto a market broker who then presents ‘blocks of risk’ to an underwriter. The firm then gets no personal representation and the underwriter has no choice but to write his business on a category of risk.
    • Really why has the profession not realised that all of this talk of risk management which has been so prevalent over the last ten years will be ignored at a cost. The cost being increased premiums. I go to risk management conferences, have spoken at them, and every year someone stands up and says “Engagement letters are important” well if the profession has not got that message yet maybe it deserves the market that it has.

    Yes the market does need looking at and I believe the assigned risk pool should be abolished but there are fundamental restructuring issues we need to deal with before we do it. If we’re going to have a free market let’s do it, but let’s make it a fair one.

    Written by Andrew Hodges

    December 2, 2009 at 5:37 pm

    Posted in Comment, LinkedIn

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