Fifteen solicitors have had sanctions imposed by the Solicitors Disciplinary Tribunal (SDT) – including indefinite suspensions – for failing to pay the premiums demanded while their firms were in the assigned risks pool (ARP).
However, the Solicitors Regulation Authority (SRA) has admitted that the problems with its mySRA system have hindered its efforts to ensure that firms do not practise without professional indemnity insurance at all.
The ARP covers firms that are unable to secure insurance on the open market and charges punitive premiums. A report to this week’s SRA financial protection committee, said five principals have been suspended indefinitely by the SDT, which recommended their suspensions should not be lifted until full payment of premiums is made.
Two more solicitors have been suspended for six months, another four have received fines totalling more than £20,000 and four solicitors have been reprimanded. In every case the solicitors were also required to pay the SRA’s costs of bringing the proceedings.
A further 15 solicitors are awaiting dates to appear before the SDT whilst other proceedings are in the process of being lodged.
Stricter enforcement of the payment of ARP premiums was introduced as part of the SRA’s financial protection strategy in 2010.
There is around £7.6m in unpaid premiums for the last two indemnity years, plus a further £7.8m in unpaid run-off cover premiums. These costs are paid by the qualifying insurers and then passed on to the profession through premiums.
Steve Wilmott, SRA director of intelligence and investigation, said: “We’ve always appreciated that economic conditions are difficult for many firms. But we also have a responsibility to the public and the profession to ensure that appropriate action continues to be taken against those firms which owe premiums to the ARP, some of which are significant.”
At the end of the 2011/12 ARP period, which closed on 31 March, 22 firms remained in the ARP out of 53 that applied to enter at the end of September. Of these, 16 have decided to close, four have been granted waivers to remain in the ARP for a short period and two have found open market insurance.
Of the 223 firms in the ARP at the end of the 2010/11 ARP period, which closed on 30 September 2011, 134 found open market cover, 73 closed, 14 continued in the ARP and two are under investigation for operating without insurance.
The SRA, with the help of external consultants KPMG, monitors those firms shutting down. The report said that “it is fair to say that the vast majority of the firms are closing in an orderly and non-contentious manner”.
However, it acknowledged that there is a continued risk that the cost and/or difficulty of obtaining insurance may result in some firms operating without cover. “We are in receipt of the insurance details from the qualifying insurers and this will be cross-matched with the information received from the profession.
“Unfortunately due to delays experienced by the new SRA online processes, a full set of data has only just been received for comparison.” The matching exercise should be finished by the end of May.
The SRA is winding down the ARP and it is scheduled to close in September 2013, after which firms will have a three-month grace period to find insurance or close.