Steve Ray – Howden The Professional Indemnity Industry’s View on the Regulatory Environment & Future Predictions

PROFESSIONAL INDEMNITY INSURANCE BROKING AND ADVISORY SERVICES

CONTENTS “The Professional Indemnity Insurers and Brokers View on the Regulatory Environment & Future Predictions” A bit of history The SRA position The CLC position What does this mean? Other regulators The future OUR KNOWLEDGE: YOUR ADVANTAGE

DIFFERING OPTIONS SRA regulated firms CLC firms CILEX Bar Mutual Faculty of Notaries ABS firms Insurance arrangements Differing regulatory perspectives OUR KNOWLEDGE: YOUR ADVANTAGE

SRA POSITION – HISTORY Solicitors in the commercial insurance market since September 2000 (SIF £250m in 1999 / Insurers £150m in 2000) What changes along the way: Moved common renewal date from 1 September to 1 October and then scrapped in 2013 Increase in minimum limit of indemnity from GBP1m to GBP2m for traditional partnerships and GBP3m for LLPs and Limited Companies (in 2004/5 year) Removal of Assigned Risks Pool OUR KNOWLEDGE: YOUR ADVANTAGE

SRA POSITION – HISTORY (CONT’D) Various consultations: Reduced limits of indemnity (to £500,000) Allowing firms to asses their own appropriate limit of indemnity, including an overall aggregate Reducing run-off cover to a minimum of 3 years Previously looked at removing lender claims and Insurers with unrated security (Quinn, Lemma, Balva) OUR KNOWLEDGE: YOUR ADVANTAGE

SRA CURRENT POSITION SRA run-off 6 year policy based on 225% to 350% of final year’s premium Successor practice rules changed in in 2010, allowing for election to run-off Consulting on making LSB regulation transfers easier Sticking point is always coverage for reserved activities not covered under CLC (or others) policy and the run-off / past liabilities If same Insurers there are theoretical deals to be done but grey areas means cannot get passed SRA (also Insurers sign up annually and therefore no clear comfort that will be there for the 6 year duration) OUR KNOWLEDGE: YOUR ADVANTAGE

CLC POSITION Insurance through a Master Policy with requirement to be insured with this until 2012 (been in place for 20+ years) Landscape changed because of one large firm moving away from Master Policy But no real opportunity for others until 2015 SLC open market option since 2015 Move to Participating Insurers Agreement meaning Insurers agree to provide coverage for firms subject to agreed minimum terms and conditions Free run-off introduced at 1 July 2016 renewal (£2million aggregate) OUR KNOWLEDGE: YOUR ADVANTAGE

WHAT DOES THIS MEAN? Still a problem to move from being an SRA Regulated firm to a CLC regulated firm. Frustrating for Solicitor firm’s specialising in Property Law SRA advised would be able to transfer from December 2015, March 2016 but this now seems to be December 2016 There are Insurers ready, willing and able to provide the polices… but need SRA onside OUR KNOWLEDGE: YOUR ADVANTAGE

OTHER REGULATORS CILEX BAR Mutual Faculty of Notaries OUR KNOWLEDGE: YOUR ADVANTAGE

THE FUTURE What does the future landscape look like? SRA membership? CLC members? Polarisation – larger firms get larger Associations / key influencers Who does what? What about other professions – ABS and Accountants and the like OUR KNOWLEDGE: YOUR ADVANTAGE

Contact us Howden pi team 16 Eastcheap London EC3M 1BD 020 7133 1300 Steve.ray@howdengroup.com www.howdengroup.com

Howden Insurance Brokers is a subsidiary of Howden Broking Group Limited, part of the Hyperion Insurance Group. Howden Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority: Firm reference number 312584. Registered in England and Wales under company registration number 203500. Registered office: 16 Eastcheap, London EC3M 1BD. This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of  Howden Insurance Brokers  Limited, except that clients of  Howden Insurance Brokers Limited need not obtain such permission when using this report either for their internal purposes or to give to their clients. The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. Howden makes no representations or warranties, expressed or implied, concerning the accuracy of information contained herein.  The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.   Copyright © August 2014 Howden Broking Group