Other insurers set to withdraw from the solicitors’ PI market and rates expected to soar as economy falters.

High Street law firms face an increasing struggle to purchase professional indemnity (PI) insurance following RSA’s decision to stop offering cover to sole practitioners and two-partner firms.

At least one other insurer was believed to be considering withdrawing cover.

Frank Maher, a solicitor partner at Legal Risk, which provides risk management for lawyers, warned that RSA’s decision to leave the smaller end of the market should ring alarm bells as the industry prepares for the annual renewals season, which runs from July to September.

Experts have predicted that solicitors could see rates soar by as much as 20%.

Maher said: “Any solicitor firm has only got limited choice because although there are over 20 qualifying insurers [offering solicitors’ PI], most firms, for one reason or another, will only have a choice of four or less,” he said.

“Some insurers will only cover big firms or firms that don’t do conveyancing. So anything that reduces the choice is immediately a problem.”

There are around 10,000 law firms in England and Wales and of those, around 4,446 are sole practitioners. The top six insurers in terms of market share in 2007, in order, were Zurich, AIG, Travelers, QBE, Norwich Union and RSA.

Zurich, the market leader, said it would not withdraw cover from any particular type of law firm, but warned it would scrutinise prices in the forthcoming renewals.

The annual renewal deadline for solicitors’ PI is 1 October, and the majority of solicitors tend to renew in the last fortnight before the deadline.

But Maher warned sole practitioners to get their PI sorted immediately to avoid any sudden mortgage claims that might render them uninsurable. An upsurge in mortgage claims is expected as a consequence of the current property market downturn, which is one factor expected to push rates up.

An RSA spokesman confirmed that the insurer would no longer write new business for one and two-man firms, but said it would still offer renewals for those firms. RSA is still writing new business for larger firms and recently launched a new package aimed at practices with 10-40 partners.

The spokesman said: “We will always write business for profit, not for volume and we see strong aggressive growth within the solicitors’ market, but it has to be on the right terms.

“This is a market that has had depressed rates for a number of years now and in common with the rest of our business we are taking the right action on rate, where it is appropriate, on a case-by-case basis.”

Tony Blyfield, chief executive of London broker Prime Professions, which met RSA last week, said: “The reduction in available capacity is likely to see rates rising. Most insurers were looking to increase conveyancing and personal injury rates anyway, so some solicitor firms will be facing steep increases.”

Law Society president Andrew Holroyd said there were still sufficient insurers offering PI to lawyers, and that the market remained competitive.