Yorkshire Building Society has said it has “no present intention” of reconsidering a ban it has decided to impose on firms with unrated indemnity insurers, even though the Solicitors Regulation Authority last week decided against one.
The SRA made the announcement despite warning solicitors that Icelandic unrated insurer ERIC was “likely to be put in liquidation”.
Yorkshire Building Society announced in April that it would insist that all law firms on its conveyancing panel had indemnity cover from rated insurers from 1 October this year. The building society said the rule already applied to new applicants to the panel.
A spokesperson for Yorkshire Building Society said: “The group’s decision to require all firms in England and Wales applying for membership of its conveyancing panel to have PII cover in place with an insurer with a specified minimum financial security rating was made entirely independently of the SRA’s proposals to ban all unrated insurers from the solicitors PII market and has been ratified by the relevant internal risk committee.
“Accordingly, whilst all of our policies remain under regular review, there is no present intention to reconsider this policy.”
In its response to the SRA’s consultation on whether to ban unrated insurers, the Legal Services Consumer Panel strongly supported the introduction of a minimum financial strength rating.
Elisabeth Davies, chair of the panel, said the “consequences of unrated insurers exiting the market can leave consumers without financial protection, even when they have legitimate claims”.
Ms Davies said the Financial Services Compensation Scheme and Solicitors’ Compensation Fund did not necessarily cover all the claims which could arise in this situation.
She said that, given the often long-term nature of claims, it was also important that insurers were stable enough to be able to pay their run-off claims.
However, Ian Park, principal of Park Law, who also responded to the consultation, told Legal Futures he welcomed the regulator’s decision not to ban unrated insurers.
“Using only rated insurers would have just put prices up and some firms out of business,” Mr Park said.
Park Law is a commercial firm specialising in international law, trade and construction, working mainly for large corporate clients and governments. Mr Park said that although his practice had not experienced a claim in 28 years, he was still having to pay an indemnity premium of £30,000 a year.
“We use unrated insurers,” he said. “It’s a matter of price. They’re cheaper. Given the choice I would self-insure, and simply make sure I had funds available to pay for a claim, in the very unlikely event there was one.”
Mr Park said that, along with the decision not to ban unrated insurers, he welcomed the SRA’s plan to cut the minimum limit for indemnity cover from £2m to £500,000.
“I think indemnity premiums will come down,” he said. “If they took a quarter off the price, it would be welcome.”