Posted by Zoe Holland, managing director of Legal Futures Associate Zebra Legal Consulting
This year’s professional indemmity insurance (PII) renewal season is now upon us. Faced with LASPO, there is an obvious sense that some underwriters are approaching this season’s renewal with more caution than previous years.
With the swathe of changes within the personal injury sector and the aftermath of Atteys and Blakemores earlier this year, against the backdrop of a legal market that is being challenged in all areas, it is not surprising that underwriters are expressing caution.
An increasing number of personal injury practices are looking towards niche areas such as industrial disease, clinical negligence and catastrophic injury. At a recent RBS seminar presented by broker Tom Davies of H.W. Wood Limited, I canvassed opinion as to how underwriters might approach firms looking to move into these areas.
Firms will be expected to demonstrate that they have sufficient experience in-house or, if not, that they have recruited and have set up the appropriate systems to deal with niche areas. Having a broker that understands the individual law firm will be more significant than in previous years.
Underwriters will be looking at how personal injury firms have adapted to the Jackson reforms. Some may want to look more closely at the re-structuring of volume-based RTA practices.
Post LASPO, M&A activity has encouraged professional indemnity insurers to look more closely at deals being made within the sector. The six years’ run-off cover issue is focusing attention and the acquiring firm’s insurers may have increasing influence over whether the deal stacks up.
The importance of risk profiling personal injury caseloads as part of the due diligence process, will lessen the risk of successor practice negligence issues and assist in protecting the acquirer’s risk profile, post acquisition. For this season’s renewal, insurers may wish to look more closely at an acquirer’s book and understand more about the process of that acquisition.
The selling firm’s PII is also under closer scrutiny. With unrated insurers having the potential to ‘go pop’, the acquirer’s insurer is less likely to be supportive of a deal where the selling firm has an unrated insurance paper. Firms thinking of strategic mergers, or those considering sale, may wish to look to alternative PII providers. The investment in a larger premium of a market leader may reap dividends.
It is not surprising that underwriters are going to be far more interested in the ‘detail’ than ever before, and it is only set to increase over the next 12 months.