In a sense, the published figures from the SRA don't tell us much that we didn't already know.  However, there is an important message behind them for law firms - namely that established rated insurers remain committed to the solicitors' PII market - and help provide stability and continuity in what has been a rather bumpy market of late.

Established Rated Insurers retain market share

Indeed the likes of Travelers, QBE and Zurich have bucked the trend and demonstrated increased market share from the position in 2012 (ranging from approximately10-14% market share each), while relative newcomers such as XL, who built up a huge market share within a matter of a couple of years by offering what some would say were unsustainable premiums, have all but pulled out of the market - falling from 16% to 2% of market share.

Beware the unsustainable 'cheap deal'

Firms who have understandably been tempted by cheap deals need to be alert to the risks.  In a market where claims continue to run at or near to an all-time high, a premium from a new/unrated insurer in the market which significantly undercuts the premium of established rated carriers will, in all likelihood, require to be balanced in a year or two from now, as claims get notified and paid.   While there remains a new carrier ready to take a risk in exchange for building up its premium base, some firms are willing to take a gamble and jump to the next insurer.   But as some of the 136 firms who found themselves without insurance this year have discovered, it can be a game of Russian Roulette.   The role of the broker is to balance (i) achieving the best possible deal for the client with (ii) ensuring that quality insurers acheive a realistic premium that is sustainable in the long term.  This offers the additional benefit for clients of assisting with cashflow and budget projections - as there is less chance of wildly fluctuating premiums from year to year.

Insurance is a long term investment

Established rated insurers such as Hannover (to whom Lockton has exclusive access), and others listed above, have a fairly stable market share that matches their risk appetite and long term strategy.  They are playing a long game - and have the reserves and resolve to cope with big losses when they arise.  Like many insured practices, these insurers value continuity, where possible.  It enables them to get to know the real risk profile of a practice over several years - and helps spread the cost of losses over a longer period.   That is why practices that chop and change insurer too often may find it more difficult to obtain cover at exactly the time when they most need a quotation.

Advice for 2014?

It is still too early to know how this year's insurance market will pan-out - but, particularly in light of the SRA recommendation in favour of a minimum rating for insurers, some commentators are already warning of another difficult renewal market ahead.   Now is the time to start making sure that your ship is in order.  As a Lockton client, we provide you with regular updates on how best to manage your risks - via the resources on our online portal, via our seminar and CPD programme, and in person via your broker, our claims advocacy team and our Risk Management offering.  Preparing for renewal starts now - not in July or August.

Calum MacLean is Risk Manager in Lockton Professions team.