Cover: only existing clients will be able to get insurance from Chartis this year
The largest provider of professional indemnity insurance (PII) to solicitors has announced that it will not be seeking any new business this year because of the Solicitors Regulation Authority’s (SRA) failure to abolish the assigned risks pool (ARP) immediately.
Chartis – which will instead focus exclusively on renewals – said it had been “disappointed” that the SRA paid “little regard” to the consultation responses it received from insurers when reforming the PII regime earlier this year and particular the call for immediate abolition of the ARP.
The SRA has instead decided to end the ARP in 2013, although in 2012 exposure to it will be shared between insurers and solicitors. For this year, however, the current arrangement will continue, meaning that insurers are liable for losses incurred by law firms in the ARP in proportion to their share of the market for the compulsory layer.
In 2010, Chartis had 17.4% and the liability of the ARP is running to around £50m a year at the moment.
In a statement, Chartis said: “The long-term sustainability of this market is best secured by insurers who are liable only for those exposures they elect to write. In short insurers cannot continue to bear unquantifiable levels of risk from legal practices that they elected not to trade with.
“In addition, our analysis indicates that the transition from a recessionary economic environment may not be a smooth one. This suggests continued poor claims experience in the market as a whole and the ARP in particular. This combined with limited changes to the minimum terms and conditions and the continued presence of the ARP in 2011 mean that we have to address our position in this market.”
It concluded: “As a long-term and major provider in this market, we strongly believe that unless and until the structural flaws inherent in this market are properly addressed it will not be attractive to those providers who prefer a long-term commitment to the market with the consistency and stability that implies.”
Elite Insurance said recently that the failure to abolish the ARP was the sole reason it was not entering the PII market, although this is not stopping First Title from doing so.
Martin Ellis of Prime Professions said the delay in abolishing the ARP has caused at least three other insurers that were looking at entering the market to hold off. “But we’re still in a vibrant insurance market,” he said. “It’s a harder market than other professions, but that goes with the claims experience.”
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