Balva is an unrated Latvian insurer that has been prohibited from writing new UK business by Latvia’s Financial and Capital Markets Commission as of 1 March 2013. As such the Solicitors Regulation Authority confirmed on Friday that it is writing to the 1300 firms that currently hold professional indemnity insurance underwritten by the insurer.
Commenting on the announcement, Ben Waterton, Director in the Professional Risks Practice at Gallagher London and solicitors’ PII specialist, said: “It is understood that Balva currently insures more than 1300 firms in the UK and while, at this stage, the ban does not affect any existing policies in force, this development must surely be another embarrassment for the SRA. Once again it has failed to address the continued issue of unrated insurers – despite approving them to sell PII.
“In recent years we have seen both Quinn and Lemma, going into administration in the solicitors’ PI space and this should serve as a wake-up call to the SRA to demonstrate stronger leadership on this issue of insurer ratings. Let’s not forget that another professional regulator, the Royal Institution of Chartered Surveyors, took decisive and positive action on this matter in 2008 when it removed Quinn from its list of recommended PI insurers. So we’ve seen that it can be done elsewhere.
“That decision followed the Irish insurer’s withdrawal from its contract with credit rating agency Moody’s, as it no longer met the RICS’s minimum criteria, which stipulated all insurers must be rated by an external rating agency to pre-defined levels.
“The trend is there to be seen so it’s simply not good enough to sit there with a ‘fingers crossed’ attitude that ultimately puts law firms, typically in the sub four partner area, in a very distressing position – notwithstanding the pressures they face elsewhere.”
The Financial Conduct Authority website confirms that the Latvian regulator has prohibited Balva, which operates in the UK through passporting rights, from writing any new business in the UK, effective 1 March 2013.
Waterton added: “It is understood that a number of these 1300 firms obtained a two-year policy which, subject to the structure of the deal, could be compromised if this restriction continues through to the main October PI renewal season. If the ban continues past that point, it would mean over 10% of the profession would be forced to find and compete for the attention of a new insurer at renewal within what is already a challenging period for firms, due to the prevailing macro economic and legal services environment.”
