As the clocks go back in October, many solicitors will be left in the dark as to whether they’re covered for new professional indemnity (PI) risks in the wake of relaxation of market regulations, warns leading Lloyd’s underwriter
As of the 6 October, many medium-large law firms in the UK will take the opportunity to break free from regulatory shackles which haven’t changed for hundreds of years.
Under the amendment to the Legal Services Act 2007, ownership and investment restrictions will be lifted, allowing non-lawyers to effectively have a large stake in an alternative business structure (ABS) and a seat on the board. In addition, there’s consolidation in the legal services sector where UK and international law firms have merged to create global professional practices.
Over the past 12 months Brit Insurance has witnessed an increase in claims from corporate law firms which have attempted to diversify the range of professional services they offer compared with the number of claims made by specialist or boutique firms.
According to Mark Figes, class underwriter for professional indemnity at Brit Insurance – leading the UK and international team – many law firms must think more carefully about the challenges they now face in managing newly merged as well as multi-disciplinary practices where new owners come from outside the legal profession.
“As a general rule of thumb, as people start dabbling, the risk goes up. And the risks that these new types of businesses face are two fold – many of their clients are trading in difficult conditions that have increased the risk of business failure and bankruptcy. This has led to an increase in PI claims against professional advisors as claimants hope they’ll succeed in getting substantial payouts for purported negligent advice. The second business jeopardy is that many of the partners of these ABS practices may lack relevant management experience of working in such structures and with multi-disciplinary teams such as lawyers, accountants and loss adjusters.
“As a result, we’ve responded to help these practices manage such risks by working closely with specialist professional indemnity agency Libra in determining the PI policies required to mitigate such exposures whilst at the same time allowing greater flexibility and freedom for solicitors practices to manage their businesses and maintain a stable environment for their premiums in the future,” he says.
Ed Pickard, managing director, Libra – a professional indemnity insurance agency – adds: “We are delighted to be working with one of the world’s most respected and experienced PI insurers who have demonstrated significant leadership in the professional advisor market segment by increasing their appetite for excess layer risks.”
The core team at Brit Insurance has increased in capability and experience with the recent hire of Patrick Ruffell as a specialist underwriter of this class who has over a decade of UK and professional services sector experience in understanding risks, procedures and protocols.
Figes concludes: “This is an exciting time in the evolution of legal firms in the UK and internationally and we are delighted to be at the forefront in assisting these practices through a combination of innovative PI products supported by a world class team to help meet the needs and requirements of the legal services sector.”
Source : Brit Insurance Press Release