Mutual only way to cover actuaries' PI

Professional indemnity (PI) brokers are warning actuaries that a mutual could be the only way to find cover following the announcement that Watson Wyatt could face legal action in the US.

The actuary has been accused of giving alleged "inappropriate advice" to pension fund trustees at a US company.

One broker said: "It may not be time just yet for a mutual, but it could be the direction actuaries move in if they continue to find it difficult to obtain cover."

Mike Dickson of Dickson Manchester said: "Actuaries are virtually uninsurable at the moment - it wouldn't surprise me if a mutual popped up."

Actuaries have been warned that they could face a raft of PI claims if Watson Wyatt is successfully sued.

One chief executive at a PI insurer said the case could lead to a flood of PI claims against actuaries.

"It's a little too early to tell what the implications of the Watson Wyatt case will be, but it may lead to a dramatic increase in claims against actuaries, perhaps worth hundreds of millions of pounds," he said.

If there is a surge in claims against actuaries it will further compound the problems the sector has experienced in obtaining PI cover.

Earlier this month, broker SBJ announced that it was offering one of the few markets for actuaries' PI, but refused to reveal details as it could result in the underwriter involved being "bombarded" by brokers.

Kelvin Curran, a partner at broker FirstCity, said that actuarial firms were experiencing difficulty in securing PI cover on the terms they are used to.

"We've been able to find cover for our actuarial clients but often not at the price they wanted."

"In some cases, insurers are reducing the limit of the cover they offer, for example the primary layer of cover on offer may have been reduced from £5m to £1m."

Last week it was reported that Watson Wyatt could be sued by pension fund trustees at Sygen, a California-based animal breeding firm.