Firms 'do not need to be concerned' over Balva, SRA says
Latvian insurer prevented from taking on more UK business
The SRA has written to 1,300 firms to reassure them, after it emerged that the Latvian regulator told Balva Insurance that it could not underwrite any new business in the UK from 1 March this year.
Balva was unrated, and the move follows publication of a Law Society survey which showed that the number of firms using unrated insurers had risen from nine to 16 per cent in the last financial year. The figure for sole practices was 22 per cent. Balva had a 7 per cent of the indemnity market, according to Law Society figures.
"While nothing is certain, we felt it necessary to write to firms to allay any fears they had over their cover," Agnieszka Scott, SRA director of policy and strategy, said. "The restriction is only on new business, so firms do not need to be concerned at this time.
"We are in regular contact with the Financial Conduct Authority and will continue to keep our eye on the Balva situation over the coming months."
Clive Sutton, honorary secretary of the Sole Practitioners Group, said indemnity insurance was a "one year deal" and there was "nothing to say" that Balva was not reliable or would not pay up.
"It doesn't mean they've gone bust, it just means that we can't use them in the future," Sutton said.
"Insurance is very price sensitive for sole practitioners, with our margins, and some people don't want to pay an extra £10,000 just to get into a Rolls Royce situation.
"We're not being cavalier about it. As long as we are assured by the FCA and the SRA that the insurance is still good, people are entitled to go for lower quotes."
A spokesman for the SRA added that the restriction did not affect Balva's obligation to provide cover for up to 90 days after 30 September if firms could not renew their insurance, nor did it affect the provision of run-off cover if a firm closed without a successor practice.
"Firms will not be able to obtain additional policies from Balva while the restrictions are in place, so they may need to seek an alternative provider from 1 October 2013."