Howden’s new PII solution for solicitors: Interviewing the underwriter

John: To start at the beginning Paul, what is the background and experience you bring to underwriting solicitors’ PII?

Paul: I started my career in Insurance in 2004 on the Graduate Recruitment Scheme at AIG, where I joined a very experienced team of underwriters with a significant presence in the solicitors’ PII market. In 2009 I left to join Allianz Global Corporate & Speciality, where I spent the next seven years again underwriting PII, which also included a significant book of business that Allianz established in the solicitors’ market.

During these years I was underwriting solicitors’ PII on both a primary and excess layer basis and for firms of all sizes, from small firms to global practices. The market evolved considerably over this time and saw many highs and lows, the most notable low being the fallout from the financial crisis in 2008. 

Throughout my time at AIG and Allianz I was regularly on the road with brokers visiting law firms the length and breadth of England and Wales. I’ve always had a firmly-held view that it’s important to meet as many clients as possible on a face to face basis. This experience gave me a valuable insight and understanding of the legal profession and the risks involved in the practice of law.

When I joined Probitas in 2016, my initial remit was to start up and build out the Syndicate’s Commercial PII proposition. Since then, we’ve written excess layer cover for solicitors in England & Wales, as well as Northern Ireland, Canada, Australia and Europe. In 2023 we decided that the time and conditions were right for us to lead a facility within the solicitors’ PII market in England and Wales.

In my current role as Head of Financial Lines at Probitas, I have portfolio responsibility for Commercial PI, Management Liability (which includes D&O and Crime) and Financial Institutions insurance. However, from an underwriting perspective, I have a strong background specialising in PII and solicitors’ PII is very familiar territory for me.

John: What prompted your decision that this is the right time to enter the solicitors’ PII market?

-

-

-

-

Paul: The decision to enter the solicitors’ PII market and lead the new facility for Howden was carefully planned and considered. There were four main influencing factors. 

Right stage in the development of the Probitas Syndicate and our PII portfolio development:

From a standing start in 2016, our PII portfolio and Syndicate footprint as a whole has grown, matured and diversified. Probitas is now a top performing Lloyd’s Syndicate with a number of years of stellar results under our belt. Our size, stability and profitability provided options for further growth.

Solicitors’ PII can be a volatile class of business. It can materially impact whole portfolios if it’s not properly underwritten, but also as a result of bad luck. Having a much larger and diversified platform to operate from means we can write solicitors in a measured way as part of a panel of A-rated insurers who share the risk on each account. Entering solicitors’ PII at this stage in our development therefore complements the remainder of our portfolio, without materially exposing it. 

 “Bandwidth”, helped by use of technology 

Solicitors PII takes time to underwrite if you are going to do it properly. In addition there are two “pinch points” during the year, being the 1 April and 1 October renewal dates, when you must have the resources and systems to manage the increased workflows.  When I started at Probitas in 2016, I was a team of one. We now have a team of five underwriters and several support staff in London. In addition, the Syndicate has invested heavily in technology.

A combination of a larger team and clever use of technology to streamline the process enables us to successfully service the new facility and manage the “pinch points”.

Rest assured, technology does not contribute to underwriting decisions, but it helps hugely with the administration that is involved. The Howden team worked with us on this to ensure that the processing is as efficient and easy as it can be. This means that our underwriters have more time to concentrate on the important business of case by case underwriting.

Claims capability

In my view if you’re entering the solicitors’ PII market you need to be able to offer a first class, expert claims service. It’s an important part of what law firms are buying when they purchase their PII. 

At Probitas we’ve developed a close relationship with Top 100 law firm RPC and we were delighted to be in a position to engage them as our TPA (Third Party Claims Administrator) for this venture. RPC have an excellent reputation in the solicitors’ PII world and I knew this would provide comfort to law firms looking to secure cover with the new facility. The TPA is overseen by our own experienced in-house claims team and the Howden claims team also continues to provide support to their law firm clients.

Technology is another important aspect of our claims capability. It has enabled a sophisticated approach to the recording of claims data that we’re able to view in real time. This means we have the ability to spot trends and identify issues of concern that could impact the profession and our portfolio at a very early stage. That’s helpful for both us and our clients.

Rating environment 

A final, but very important point influencing my decision to enter the solicitors’ PII market at this time is the rating environment. When Probitas entered the market in 2016 there had been an extended period of compound rate decreases, which lasted well over a decade until 2018/19. The rating environment for solicitors’ PII was quite honestly unsustainable and insurers were losing money hand over fist. 

It was no surprise when the thematic review by Lloyd’s of London in 2018 determined that PII was one of the most unprofitable lines of business. That was the catalyst for change and there was a mass withdrawal of insurers from writing PII. Rates began to increase and continued to do so until 2023. At that point I considered rates were within a sustainable range and this put us at the right point in the market cycle to lead a facility, which we did in August last year.  

John : Why have you decided to partner with Howden exclusively as opposed to opening the facility up to a broader range of brokers?

Paul: I was clear from the outset that we were not going to work with a panel. Working exclusively with a broker enables us to build very close working relationship with a trusted partner who understands “inside out” the types of firms we want to have within the portfolio. It also eliminates the bottlenecks and challenges of managing multiple brokers at the 1 April and 1 October renewal “pinch points”. 

Howden is absolutely the right fit for us. Here’s why:

-

-

-

Successful proof of concept 

Prior to entering the solicitors’ PII market with Howden, we’d recently had a positive and successful experience working with them to develop another line of PII business. I was impressed by their ability to bring together the people and skill sets within their business and make things happen. Quite simply Howden gets things done and I was confident that together we would make this venture work.

Brokers who know the profession inside out and specialise in this area 

I have a 20-year record of working with some of the leadership team for Howden’s Legal Practices Group. I have trust and respect in these relationships and know this is mutual. Their wider team has strength in depth and knows the legal profession inside out. This has enabled them to build the very significant client base that they have and continue to grow. Their approach to thought leadership and risk management is also highly impressive and ensures that a holistic service is delivered to clients.

Excellent trading relationships 

Howden were already our number one broker by premium before we started the facility. Their entrepreneurial approach and professionalism mirrors that of Probitas and makes for a very easy and effective fit. When we first started exploratory chats about Probitas leading a solicitor’s PII facility, it was quickly apparent that working with Howden would be a great match. Both parties want to build a long term and sustainable portfolio where careful risk selection and longevity are paramount. 

John: In your view what are the most important issues to consider when underwriting solicitors’ PII?

-

-

Paul: To underwrite the legal profession successfully, I believe you need to view things from both a micro and macro perspective. By this I mean forensic underwriting of individual risks (micro) and also portfolio management (macro).

The micro lens

Risk selection is key. I think it’s really important to understand not only what a law firm does (i.e. mix of business, fees etc) but how they do it (i.e. controls, risk management, governance and compliance) and as far as you can, the culture of the firm. Proposal forms are far more comprehensive than they used to be. They give an abundance of information about what a firm does and that is important. But an underwriter also needs to really get under the skin of a firm and understand the risk. The best way to achieve this is via a broker who knows the firm well, and also by building a long-term relationship with the firm ourselves. This includes meeting with the firm to the extent that this is possible.  That is something I’m very keen on.

Howden understands our attitude to risk selection and carefully triages the firms that they feel will meet our requirements in terms of risk management and governance. We’re therefore presented with submissions for firms we’re more likely to want to partner with.

We don’t want to build a huge, unmanageable portfolio of firms, and are very selective. We’ve only written circa fifty law firms since October, when in reality we could have written multiples of this, adding far more premium in doing so. But this wouldn’t be sustainable. We would rather have a smaller portfolio of well-run firms with strong risk management, which will be sustainable over the course of long-term relationships.

The macro lens

Portfolio management is important too. We need to understand the make-up of the portfolio and how it is performing as a whole at any given time. As discussed above, Probitas has invested heavily in technology and systems which allow us to capture data and interrogate it in real time at a very granular level. This affords us a dynamic approach to portfolio management and enables better strategic underwriting decisions.

John: Why have you decided to include firms that undertake up to 100% conveyancing within your appetite compared to other underwriters who have capped conveyancing work at a lower percentage limit?

Paul: When deciding on the profile of firms we wanted to target (and conversely avoid), I was keen that there should not be an upper limit on the percentage of conveyancing or any other area of work, and this view was shared by our co-insurers. I know this is a tool some insurers use to triage the firms they might see submissions for, but I don’t agree with it. 

There is no doubting that conveyancing accounts for the largest number of claims against law firms. But, I believe if a firm:

• is a specialist;
• has the right attitude to managing risk; 
• has invested well in technology and getting their process flow, risk management procedures (including file opening, supervision and auditing) and governance right; and 
• can demonstrate a good claims record over a sustained period;

then it can be a much better performing firm than a firm who only undertakes a small amount of conveyancing.
 
I would caveat this by saying we are particularly forensic in underwriting firms with high conveyancing exposure, so we can identify those we consider to be the “best in class”. We drill down into the detail of the work that is being undertaken and how it’s being done. Adopting this approach we’ve acquired small number of specialist property firms (undertaking more than 75% property work) in the portfolio and we believe they are excellent clients.

But the macro perspective is equally important and we’re closely monitoring the portfolio to see what the overall weighting of exposure is to conveyancing, and understand how much property work is undertaken as a weighted average. The portfolio needs to be balanced as a whole. Experience tells me that this portfolio approach in conjunction with careful individual risk selection will lead to long term sustainability. 

John: What is the ideal profile of law firms you are particularly looking to attract?

Paul: We’re limiting the facility to firms with 1 to 10 principals, but beyond that we don’t impose any limitations. As already discussed, it’s not about split of work or a threshold of gross fees, it’s far more about attitude to risk, governance and controls and business management. We want firms that demonstrably take these issues seriously with good practices embedded into the culture of the firm.

Howden understand what we’re looking for and take time to triage and assess law firms before they are presented to us. This means we can devote our time to a comprehensive underwriting process, enabling us to understand and select those risks we want to secure to our portfolio.

John: What would you say to competitors who question whether you are committed to the solicitors’ PII market and are in it for the long haul?

Paul: As you know, the Solicitor PII market is full of gossip and speculation. Competition from a new entrant without the complication of legacy issues is bound to prompt such “chatter”! But hopefully our discussion today will give law firms a better understanding of why we’ve entered the market, our experience, and the cautious approach we’re taking to growing our book. We’re in this for the long haul.