Ever since the Professional Indemnity Insurance renewal date for solicitors was moved to October 1st, July has been the month for brokers and others in the market to urge firms to get their proposals in. This is not advice to be ignored.
Even for Profitable Law Firms...
Until three years ago there was ample capacity in the market and, for many firms, leaving things late meant picking up a bargain – rather like booking a last minute holiday.
Then the market turned. Substantial underwriters dropped out, and others became ever more selective in the risks they wanted to take on. The consequence has been that many more firms were unable to find an insurer and went into the Assigned Risks Pool (ARP) – viewed by some as the business equivalent of being an inmate on death row.
This is 2010, Not 2007...
Conventional wisdom has been that the only firms in the ARP were small, badly managed, and probably deserved their fate. This was undoubtedly true for some firms – but that does not account for the growing number of firms in the ARP, with estimates for this year ranging well into the hundreds and beyond. Many will be small, yet well-managed law firms with strong finances.
An Unbalanced Market
The fundamentals of the market are no longer in balance, with demand far outstripping supply. Although there have been new entrants to the market in recent years, and there may be more this year (such as Liberty), 2010 still promises to be an exceptionally difficult year. As Frank Maher, of Legal Risk, has pointed out, it is not only small and badly-run firms who could find themselves without cover.
Large and/or well-managed firms may also find that their current underwriter no longer has the appetite, and that no one else is interested.
Just Do It
The only sensible advice, almost irrespective of who handles your risk, is to get the proposal in – before the partners depart for holiday, taking the last vital bit of information with them. Virtually every broker we know has issued advice to the same effect. For your own protection, do not treat 2010 in the same way as previous years.
For a more technical, comprehensive (and probably more cogent!) assessment of the prospects for this year’s PI market, please see Frank Maher’s assessment on page 3 of Legal Risk’s most recent Newsletter. This may not make for happy reading – but this does not mean he’s not absolutely correct.
We wish all solicitors seeking cover the very best of luck. There is still a market for well-presented risks through good brokers, but this is probably not the year to be doing too much shopping around.