Lawyers would have to find replacement cover in four weeks if failure is deemed an “insolvency event”
The Solicitors Regulation Authority (SRA) is seeking advice from regulators on whether the recent failure of Latvian insurer Balva should be considered an “insolvency event”.
If so, lawyers covered by the firm will have four weeks to find replacement cover, or enter the assigned risks pool (ARP).
Balva provides solicitors’ professional indemnity insurance to UK lawyers, and has a 6.8% share of the UK market. The company insures about 1,300 UK solicitors, according to legal publication The Lawyer.
Balva’s regulator, Latvia’s Financial and Capital Market Commission, ordered the insurer to start winding up its business on Monday.
The company now has the option to appoint a liquidator or transform the company into one that does not conduct insurance business.
The company is obliged to continue fulfilling its obligations, and is not insolvent.
The SRA said: “The position under the SRA Indemnity Insurance Rules is that, as yet, there has not been an ‘insolvency event’ as defined in the UK.
“We are seeking advice on the application of the definition of ‘insolvency event’ to this developing situation, working with our partners at the Financial Conduct Authority and the Prudential Regulation Authority.
“If an ‘insolvency event’ occurs we will contact all firms currently insured with Balva explaining the action they must take. This would involve any firm that has professional indemnity insurance with Balva obtaining replacement cover within four weeks of any confirmation of any insolvency event.”
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