Increased capacity surge increases competition

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Guest Author, Kate Burt - HiveRisk

As the 1st April renewal deadline looms closer, many law firms in the UK are feeling the pressure of their professional indemnity insurance (PII) renewal process.

The PII market has always been a challenging terrain and Howden’s Bi-Annual PII Market report has long been recognised as an industry leading resource. Their latest report published January 2024 provides deep insights for law firms, helping them make better informed decisions and navigate the uncertain waters of PII including renewals and wider issues.

The report, authored by Howden’s Legal Professions Executive, Jenny Screech, confirms the introduction of Howden’s facility using Lloyd’s A-rated capacity in August 2023, followed by Fortegra’s market entry in September 2023 with potentially other entrants on the horizon. This has stirred competition among insurers and the influx of capacity is said to signal potential for rate stability and better premiums, especially for law firms that insurers find attractive risks to underwriters.

Whilst a welcome development, the report cautions firms not to jump away from their existing insurer on presentation of more attractive renewal terms without weighing up the benefit of continuity and that firms should seek advice from their broker before making any snap decisions. 

Further tempering of the news of the capacity surge provides that it’s unlikely to lead to a return to pre-hard market premium levels explaining that insurers must strike a balance to provide sustainable cover under Minimum Terms and Conditions.

On a practical level, firms are advised to consider exploring longer-term policies early in the renewal process to streamline the renewal process and secure financial stability and operational efficiency in the long run.

Firms are also urged to kickstart any PII funding process early, especially if their financial position has weakened since the last renewal to avoid last-minute financial concerns ahead of the anticipated scrutiny on premium finance in 2024.

With the April 1st renewal deadline fast approaching, by staying informed, proactive, and vigilant, firms can navigate the complexities of the PII market with confidence and secure optimal terms. 

Other critical topics included in the report include the importance of accurate financial calculations for PII purposes and offers practical guidance on determining a law firm’s gross fee income. For firms considering the acquisition of a will bank, the report illuminates essential regulatory and liability considerations before making any significant decisions.

Various scenarios of bank failure on client accounts and offers strategies for risk mitigation are explored, as well as escalating cyber threats.  Exemplified by recent events like the CTS cyber incident, the report underscores the necessity of securing separate cyber cover.