Some 240 of the 336 law firms (71%) in the assigned risks pool (ARP) are new to the insurance safety net, with 10-20% of the total thought to pose a “serious risk”, it has emerged.
Solicitors Regulation Authority (SRA) papers show that 30-60 firms are in the serious risk category and face immediate SRA investigations, with referrals for regulatory action to be made where appropriate.
The action is part of the SRA’s ARP enforcement strategy, agreed in the summer, which aims to tighten the monitoring and supervision of firms in the pool, and ensure they are all up-to-date with their premiums and, if they are not, that they are “managed out promptly”.
The SRA’s compliance committee will hear next week that only 13 firms which were in the ARP before the 1 October renewal are subject to potential intervention. This was out of 142 firms (from a total of 213) that had either been in the ARP but not paid their premium, or which were approaching the end of the maximum two years in the pool (now reduced to one).
Of the other 129 firms, as at 5 November:
- 33 have closed;
- 28 have found insurance on the open market;
- 52 have obtained further cover in the ARP by either paying the outstanding premiums in full or agreeing an instalment plan – several hundred thousand pounds of outstanding premiums have been collected since mid-July;
- 13 are being monitoring through wind-down; and
- 3 have other “outcomes”.
The committee will be told: “The position in relation to the number of firms potentially facing intervention is considerably better than had been feared at the commencement of the enforcement action and this is largely attributed to the close attention paid to firms through the enforcement action process.”
The SRA has a working group meeting weekly, and established a new visit programme for ARP firms facing enforcement, which includes snapshot reports produced within 72 hours of visits starting.
Ten of the 88 firms visited in August were referred for further investigation, mainly because books of account were either absent or incomplete, or because there was evidence of client account shortages.