Latvian insurer Balva announced yesterday that it has called in liquidators, leaving approximately 1,300 firms of solicitors across England and Wales effectively without PI insurance cover, (click here for more information). Whilst it seems as if claims that were notified prior to the announcement will still be honoured, those firms affected will need to obtain replacement cover within the next 28 days or face being sucked into the Assigned Risks Pool and being forced to close if no alternative cover can be secured within a further three months.
This is the third time in recent years that an unrated insurer on the Solicitors Regulation Authority's (SRA) Qualifying Insurer list has failed, and it serves to intensify the pressure on the SRA to ban all unrated carriers from providing PI insurance to the legal sector. This is something that many commentators have been calling for for some time, but the SRA has been reticent to take this step for fear that the unrated carriers keep the market for solicitors PI keen and prices low; a blanket ban on unrated carriers is likely to result in an increase in premiums for solicitors PI across the board, as the removal of the cut-throat pricing that has been the hallmark of the unrated sector will free up the remaining qualifying insurers to charge at what they would consider to be a more realistic and sustainable level.
This development comes at a bad time for solicitors, as most firms will not yet have bound renewal terms for the 2013/14 year and will be looking to do so before October. Any immediate hardening of the market for solicitors PI in the aftermath of this event could therefore hit firms hard. With the SRA having announced yesterday that an unprecedented number of firms are already on the verge of collapse due to financial pressures, this will be very unwelcome news.