Nearly half of law firms – 47% – secured cheaper indemnity insurance this year, a survey has suggested. Half of these obtained “significant” reductions.
The survey of managing partners by Liverpool-based advisory law firm O’Connors also indicated a move by firms from unrated to rated insurers, with 11% saying they had managed this.
In a further positive sign, 11% of firms said they had secured indemnity cover for the next 18 months, with a further 10% opting for a range of periods from 15 to 24 months.
The vast majority of law firms currently insure on the traditional annual basis, with, according to the survey, only 7% not having to renew in October.
Nigel Wallis, partner at O’Connors, said none of the firms in the survey complained that they had been unable to secure acceptable renewal terms.
Mr Wallis said 29% saw a slight increase in premiums, with 10% suffering a “large hike”, but the increases were blamed on “higher turnover and staff numbers, rather than a hardening market which commentators say remains awash with capital”.
He said respondents reported moving from unrated insurers to A-rated insurers at the same premium, which “must be a satisfying outcome”.
The level of premiums paid, according to the survey, ranged from just below 1% of turnover to just over 10% of turnover, with the highest number of firms, 54%, paying between 1% and 2%.
The vast majority of firms, 92%, purchased the same amount of indemnity cover as last year with just 5% increasing it. Just under a third, 64%, renewed with the same insurer.
Asked if they would have reduced their cover given the chance to £500,000, the figure put forward by the Solicitors Regulation Authority in its indemnity reform plans, only 13% said yes.
All the managing partners in the survey said they used a broker. Willis advised the biggest proportion of firms (17.5%), closely followed by Aon, Marsh, Lockton and Towergate.
“Things seem a little calmer this renewal season and it will be interesting to see how many firms have to take advantage of the extended indemnity period compared to last year”, Mr Wallis said.
“The cost of run-off cover remains a concern for many, with 92% of respondents believing it to be a ‘barrier to exit’ from the industry. One poor soul said his whole family desperately wants him to retire but he can’t afford the run-off premiums.”
High-profile failures of unrated indemnity insurers such as Balva appear to have left only three in the market – Alpha Insurance, based in Denmark, Elite Insurance, based in Grantham, and Enterprise Insurance Company, based in Gibraltar.