Thousands of solicitors could be impacted if Quinn is removed from approved insurer list

More than 2000 UK law firms could face financial disaster if the Law Society de-lists Quinn Insurance as an approved insurer after the company was placed in to provisional administration on Tuesday, Lockton has warned.

Solicitors, mainly at the smaller end of the market, will be forced to find cover within 45 days or go into the Assigned Risk Pool if the insurer is delisted.

Neil Nimmo, executive chairman of Lockton Risk Solutions, said: “Nearly 2,200 law firms could be left stranded by this disaster. Entering the ARP has serious financial consequences for smaller firms, since they will have to pay highly punitive premiums until they find alternative commercial coverage.

"For many small firms, already feeling the effects of the recession this could be the final nail in the coffin. And even if Quinn remains an approved insurer, questions will be asked about its ability to pay claims going forward. A lot of solicitors have some tough choices to make about where they get insurance and how much it will cost them.

“As well as the costs to the individual firm, more firms entering the ARP will have negative consequences across the industry. There have been numerous complaints from insurers that they have been left to pick up the credit exposure from this insolvency because if Quinn’s clients go into the ARP that will drive the rating up across the sector. The number of firms in the Pool has risen from 150 in 2008, to 300 this year, with around 500 anticipated for 2010, and it is likely to account for 10-15% of premium costs paid by the profession in 2010. We believe these costs are unacceptable.”

However in a statement Law Society chief executive Desmond Hudson said: "The Law Society has delegated its regulatory obligations and powers to the SRA that sets the professional indemnity insurance rules that insurers and solicitors must follow. As part of this role, the SRA maintains a list of qualifying insurers for each indemnity year. To become a qualifying insurer, an insurer must be authorised to conduct insurance business in the UK and sign the Qualifying Insurer’s Agreement. The SRA does not approve, vet or regulate qualifying insurers. The Irish Financial Regulator regulates Quinn."

Yesterday, the Law Society said: "The Law Society is aware of concern around professional indemnity insurance (PII) policies provided to solicitors by Quinn Insurance, which has been placed in provisional administration in Ireland. It would appear that those policies will be honoured, although we are seeking urgent clarification from the Financial Services Authority and the Irish financial regulator. The Solicitors Regulation Authority (SRA) recommends that policy holders take no action until the situation is clear and the Law Society supports that advice."