Elite Insurance, one of only three unrated indemnity insurers of law firms and the only one based in Britain, announced yesterday that it is leaving the market.

The move leaves only two unrated firms on the Solicitors Regulation Authority’s list of qualifying indemnity insurers – Alpha Insurance, based in Denmark and Enterprise Insurance, based in Gibraltar.

Elite cited a range of reasons for its decision, including “increased propensity to fraud on solicitors’ client accounts”, the government’s proposed increase in the small claims limit for personal injury cases, and falling premiums.

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Separate representation for lenders and borrowers in conveyancing transactions “should be the norm”, a senior manager at professional indemnity insurer Zurich has said.
“The increased cost of separate representation is minimal in the context of the overall cost of a conveyancing transaction,” Michael Blüthner Speight, risk manager for professional and financial lines, told last week’s National Property Conference.
“It is already routine for commercial conveyancing transactions.
“A considerable level of claims relating to conveyancing stem from the inherent conflict that arises from acting for both borrower and lender.

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Paul Philip, chief executive of the Solicitors Regulation Authority (SRA), has hit back after the regulator’s indemnity insurance reforms were fiercely criticised by the Law Society.

Mr Philip said the latest plans, set out in a discussion paper published in July, contained “absolutely no recommendations”, despite what “other organisations” had said.

The chief executive told yesterday’s SRA board meeting that the regulator would “come back with specific recommendations late this year or early next year”.

Mr Philip described how the Legal Services Board said it needed more evidence before approving last year’s reforms plans, including reducing the minimum level of compulsory cover to £500,000.

Responding to the discussion paper earlier this month, the Law Society said the regulator’s “starting points remain flawed” and the plans could “only increase the burden on firms and raise uncertainty” as to whether firms were complying with the rules.

The society said the paper appeared to be “driven by a desire to reduce solicitors’ overheads” and claimed cost savings which were not substantiated.

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Solicitors’ professional indemnity insurers cannot aggregate multiple related claims when the terms of the transactions are not conditional or dependent upon each other, the High Court has decided in a ruling said to protect law firms from financial risk.

It is the first judicial authority on the aggregation clause of the Solicitors Regulation Authority’s minimum terms and conditions (MTC) and means that AIG now faces claims worth more than £11m, rather than the £3m limit for a single claim.

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