In brief: 1 October 2023 renewal of solicitors’ PII

The introduction of new capacity to the solicitors’ PII market was the big news for the 1 October renewal.

In August the solicitors’ PII team at Howden introduced a new A-rated facility with Lloyd’s of London insurers. This facility was the first meaningful new capacity to be introduced to the solicitors’ PII market for some years. It is exclusive to Howden and builds on our existing access to one of the widest selections of insurance providers available through a single broker.

In late September another insurer, Fortegra, also confirmed that they were open for business in the solicitors’ PII market and they are likewise accessible to Howden.

These developments bode well for those firms yet to renew this year and for 2024.  However we do want to sound a note of caution. The introduction of new capacity should not be seen as the cue to jump ship and change insurer. While this development certainly presents alternative options for some firms, continuity with your existing insurer will always be an important factor. Howden are best placed to advise you on taking the right option for your firm.

The key issue is the stabilising impact that the introduction of new capacity has across the market. The increase in competition means existing insurers need to be mindful of keeping premiums in check to ensure they retain those firms they know will be attractive to the new entrants.

More rate stability for premiums was also welcome news for firms.

When it comes to premium the good news is that we have clearly moved on from the relentless and steep rate increases that firms experienced during the height of the hard market. Our Market Report published in July recorded that a number of firms renewing on 1 April this year saw rate reductions. These were generally modest and often overlooked due to the premium increasing as a result of the reduced rate being applied to an increase in gross fees, but it was encouraging progress.

For 1 October we saw a continuation of this “rate-softening” for many firms. As always the position for each firm depended on factors such as its claims experience, the level of risk associated with the work it undertakes and the rating adequacy of the expiring premium.

While this is good news for those firms yet to renew in 2023 and as we move through into 2024, we do need to manage expectations. Firms should not expect premium rates will fall to the levels we saw prior to the hard market. There is no doubt that what we have experienced has been in part a market correction. Rates will need to settle at a level that enables insurers to provide cover that can be sustained under the very broad Minimum Terms and Conditions with which policies must comply.

There is also a need for caution given the wider economic backdrop. History tells us that claims against the legal profession can increase when times get tough, interest rates increase and property prices fall. Insurers are watching developments in the property market carefully, as are we. In our January Market Report we will provide an update on claims activity, particularly with reference to conveyancing. This will be important as we look ahead to 2024.

The Building Safety Act 2022 (“BSA”) has attracted attention and emerged as a new issue for 1 October renewals.

The BSA is proving to be a thorn in the side of the legal profession. It is new, complex and presents a number of challenges in relation to the conveyance of leasehold property. For the 1 April 2023 renewal this issue had not really hit the radar for PII insurers in the solicitors market, but that quickly changed as we approached the 1 October renewal. A number of insurers began to ask more in-depth questions about this work.

Fortunately it is not claims activity that has attracted their attention – at least not yet. Insurers have picked up on the difficulties with the BSA that have been well-documented in the legal press. They are concerned about the additional risk and the potential for claims.

Firms need to be mindful of this development and ensure that at their next PII renewal they will be in a position to respond in a way that will give insurers the reassurance they are seeking. For more information on this issue we refer you to our recent article available here.

Howden will provide an in-depth analysis of the 1 October renewal and discuss the outlook for 2024 in our Market Report that will be available in January. Keep an eye out for publication.