Regulator says Solvency II will offer protections that are similar to rated insurers
The Solicitor’s Regulation Authority (SRA) has scrapped plans to introduce a minimum requirement for solicitor’s professional indemnity (PI) insurance firms to be rated B or better.
The regulator said that Solvency II, expected to come into force in January 2016, would give policyholders similar protection to the mooted minimum B financial strength rating.
The European directive will impose stricter financial standards and reporting requirements for insurers.
An SRA spokesman said: “When you weigh up the protections offered by Solvency II against the impact of a B minimum rating, on balance it is not the right decision [to impose a minimum rating] at this time.
“The specific aim of the minimum rating was to make sure that consumers got the same protection as rated insurers. Now that Solvency II is coming, the protections it will introduce will be the same as having ratings.”
Had the changes gone ahead, more than 2,000 law firms could have been left without PI cover, the spokesman added, as two PI insurers have said they may not be able to secure a rating before the proposed October deadline.
Last month the Law Society warned that solicitors could face higher premiums or even go out of business if the SRA went ahead with plans to introduce a minimum financial strength rating for insurers.
Insurance Times understands that the SRA board held several discussions over the weekend before announcing its decision yesterday.
Proposed changes to minimum terms
The SRA is also expected to publish its consultation today to see whether the minimum terms for solicitors’ professional indemnity should be changed.
The regulator said this will ensure that the minimum terms and conditions set for firms are proportionate while maintaining protection for the public, particularly individuals and small businesses.