As U.K. solicitors' professional indemnity insurers continue to total the results of the Oct. 1 renewals, they will be hoping for rate increases of between 5% and 10% according to Neville Miles, a partner at broker Lockton Companies LLP in London.

"It's too early to tell," Miles told Best's News Service. "Everybody's still grinding through the numbers."

The solicitors' PI sector, Miles noted, offers its own kind of fragmentation, with insurers often split between the highly volatile smaller end of the market and the U.K.'s largest law firms.

Lockton, which represents the full range of clients, has enjoyed a "reasonable" year, Miles said. "We act for about a thousand firms," he said. "Twenty-five of them are in the top 100." Miles said he expects results from the renewals to come in around the end of October.

As the insurers pushed for rate increases, Miles said, those without a lot of property exposures faced strong competition. Smaller law firms, he said, found plenty of choice among insurers, he said. The level of choice is particularly noticeable, Miles suggested, for customers of Alpha, Elite and Enterprise, the three solicitors' PI insurers that are not rated by a rating agency.

The Solicitors Regulation Authority, which oversees U.K. solicitors, has decided against making assessments of the financial strength of insurers. Miles recalled the anxiety expressed last year by a number of U.K. law firms after the Latvian regulator removed the license of Balva, a Latvian insurer that had been writing solicitors' PI business in the U.K. As a Latvian insurer, Balva had been authorized to write business throughout the 28-member European Union.

"There has been a track record of unrated insurers coming into the market, making a great deal of money in the short term and then pulling out of the market," Miles said, noting the ability of the unrated carriers to offer lower prices.

The SRA's reluctance to monitor the financial strength of the insurers - whether they are rated or unrated - has been criticized from within the legal profession, Miles said. He also noted moves from within the building society sector to stop placing business with law firms that do not use rated insurers.

Miles, who estimated the share of the U.K. solicitors' PI market held by unrated insurers at around 12%, said Lockton does not use unrated insurers.

Churn is especially high among small law firms, Miles said. "It's very price-driven," he said of this end of the market. "And those smaller firms won't hesitate to move from one insurer to another."

Miles hesitates to estimate the size of an insurance market that serves 11,000 British law firms. He puts premium income for compulsory covers at about £260 million (US$418 million). These would include the £2 million minimum that partnerships must carry, and the £3 million that limited liability partnerships must buy. Above that, Miles said, the very large law firms are buying hundreds of millions of pounds worth of cover.

The underwriters' hope for a 5% to 10% rate increase, Miles said, is based on what they regard as necessary to achieve balance.

"There have been some very significant losses right across the portfolios, from the sole practitioner to the very large firms," Miles said. "So I would be surprised if there are many insurers making much money out of this class."

Losses have built up over the last five years or so, Miles said. While their frequency may have slowed down, the severity of individual claims has increased significantly, he said, pointing to settlements of £15 million to £20 million. Insurers, he noted, face the additional cost of defending these claims.

The Solicitors Regulation Authority has estimated that fewer than 4% of U.K. law firms took advantage of a rule change that allows them to renew their insurance at any time of the year. Previously, this could only be done on Oct. 1.

Miles offered a similar count, estimating that only 2% to 3% of firms made the change. He suspects that the shift has been limited to the top 100 firms. Some of the larger law firms, Miles said, have decide to renew in the spring to coincide more closely with the beginning of the financial year. The smaller firms, Miles said, are likely to stay put, on the grounds that they all benefit from a market that is focused on a single date.

Neville Miles was interviewed by Robert O'Conner, London Editor for Best's News Service