1 October 2024 Solicitors’ PII Renewal Review – has the soft market returned?

For firms that renewed their insurance on 1 October this year, it will likely have been a much less stressful experience than in recent years.

There was increased capacity and appetite pretty much across the board from insurers, and it was clear that both brokers and insurers were very keen to win new business at any opportunity.

We will be providing a detailed analysis of the 1 October renewal and our predictions for 2025 in our Market Report which comes out next January. In the meantime, here are the main highlights.

Capacity

Capacity was much more plentiful and markedly more so than for the 1 April renewal. At Howden we were able to offer our clients exclusive access to the new Howden facility first launched in August 2023 and underwritten by A-rated Lloyd’s of London insurers. We were also one of the few brokers with direct access to another two new players who have come to the market within the past 12 months, namely Fortegra and Alchemy Underwriting.

Additionally, we continued to uphold strong relationships and direct access to a wide range of other A-rated markets that have long been providing solicitors’ PII. This growth in capacity is promising for firms due to renew in April 2025, especially for Howden clients.

Appetite

The increase in capacity has led to greater competition among insurers as they sought to attract or retain firms they view as good risks. We reported in our last review for the 1 April renewal that several insurers were starting to relax restrictions on traditionally higher-risk areas of practice and this increased yet further, particularly regarding the percentage of conveyancing and personal injury work undertaken as a proportion of a firm’s overall gross fees. As a result, more of our clients had a wider range of insurers to choose from. We anticipate this trend will carry on into the coming year.

Premiums

Rate reductions were generally the order of the day, provided firms had not suffered any significant claims activity or deterioration in claims experience. We have seen some other brokers reporting double digit rate reductions across their entire book; however, this should be taken with a pinch of salt. No two firms are the same and, if your firm has grown significantly over the past 12 months. Your increased gross fees may still result in an increase in your premium despite any rate reduction. 

Policy period lengths

Longer term policies were widely available, having almost completely disappeared during the hard market, although they had started to come back from October 2023. A number of our clients took the opportunity to opt for 18-month policy periods, with the added certainty and security this provides for cost and coverage. However, some clients opted to take their chances and stick with a 12-month policy period, in the hope that premiums might have reduced yet further come this time next year. Whether that will happen remains to be seen.

Excess layers

We found that savings were generally achievable for excess layer policies up to £10 million (£7 million over £3 million for incorporated entities; £8 million over £2 million for non-incorporated ones). Above this level premiums were generally stable, owing to low claims activity historically at this level meaning higher excess layer premiums have generally always been fairly keenly priced. Now is a good time to purchase additional cover to meet the potential exposure from claims inflation.

Premium financing

One area where the news was not so positive was premium financing. Firms are finding it more difficult to obtain financing for their insurance premiums, with credit providers asking for more information and applying more stringent criteria than in previous years and taking much longer to make decisions. This is possibly linked to the recent cost of living crisis and also the significant increase in company insolvencies and administrations over the past 12 to 18 months. With this in mind, please make sure you get your financing sorted as early as possible.

Cyber

We noticed a small increase in uptake of cyber insurance by firms, although adoption of cyber insurance remains very low amongst the legal profession (just 27% according to the most recent Law Society PII Survey, although this figure is higher across our book of business). Some firms told us they had used the PII premium saving they had achieved as an opportunity to purchase cyber cover for the first time, so there was no overall increase in insurance outlay for them.

Sharp tactics?

We became aware that some brokers (no doubt with very challenging new business targets) were prepared to offer a discount, or even work for no fee or commission in order to win business. A word of caution here: such brokers will not work for free for ever; also, different brokers have vastly different offerings for law firms, like access to the market or added value services such as claims and risk management offerings, so please do your research before considering moving brokers for the sake of a cheap deal that could ultimately cost you more in the long run.

Proposal Forms

Many insurers were prepared to accept short-form declarations this renewal rather than insisting that firms had to complete lengthy proposal forms, which was good news for many of our clients. We expect this trend to continue into next year, although most insurers normally insist on a full proposal form being completed at least every 3 years in order to have a full understanding of your firm as a risk.

Overall, this was generally a positive renewal season for our clients and we expect it will be a similar story come the 1 April renewal next year.

A final note of advice: Some firms could do more to explain their claims activity to insurers and how they have put steps in place to minimise the risk of recurrence of any claims they have incurred. Certainly those that gave this the attention it rightly deserves obtained the best results with their renewal. Insurers are keen to take on a good risk, but “risk” is the key word here.