Solicitors are facing the ‘most challenging’ professional indemnity insurance market in years, commentators said this week ahead of Friday’s renewal deadline.

The news came as the Law Society launched a SafetyNet scheme designed to help firms that cannot obtain cover.

Brokers predicted that the total premium pot paid by the profession could hit £300m, with an estimated 500 firms likely to fall into the assigned risks pool.

Steve Holland, executive director at broker Lockton, said: ‘The escalating cost of professional indemnity premiums may mean the total premium pot for solicitors approaches £300m.’

He said this would exceed the £245m in premiums paid last year, and would mean the total amount paid by solicitors would for the first time exceed the peak contribution paid to the Solicitors Indemnity Fund, which stood at £256m in 1999. The SIF was abolished in favour of a free market for PII in 2000.

Holland said: ‘Firms involved in property and commercial work will have borne the brunt of the rate increases this year.’

He predicted there will be around 500 firms in the ARP come 1 October, but said others in the industry were putting the ARP figure at 1,000. There have been 269 firms in the ARP during 2009/10.

Holland said the cost of the ARP was getting ‘out of control’. In past years the typical cost to insurers of the ARP was 1.5% of total premium, but a rise in claims meant this had now grown to 15-20% of the total premium pot, he added.

Simon Lovat, divisional director at United Insurance Brokers, said the total premiums paid would ‘undoubtedly be higher’ than last year, though he put the figure closer to £260m.

Lovat said the departure from the market of insurers including Quinn and Hiscox meant there is a lack of capacity, despite new entrants such as Vision Underwriting and Alpha Insurance coming into the market.

Sandra Neilson, head of the large firm practice at Marsh, said the number of firms in the ARP would exceed last year’s figure, but would not be as high as some have predicted and was unlikely to be more than 400.

‘The market has stepped up to the plate, so things haven’t turned out as bad as people thought. A free market will provide a solution in most cases,’ she said.

Nick Pointon, managing director at PYV Legal, predicted that there would be a ‘live market’ after 1 October, with many firms that initially find themselves in the ARP able to get cover after the deadline.

A Solicitors Regulation Authority spokesman said: ‘We do acknowledge that this year’s renewal round is the most challenging for many years.’

Seeking to address the difficult market, the Law Society launched a SafetyNet scheme this week, designed to help firms that have been unable to secure cover. Managed by Lloyd’s broker PYV, it will seek to provide firms with access to insurers which specialise in ‘distressed’ risks.

Firms will have to undergo an assessment to determine their suitability for the scheme, which aims to improve their risk management to enable them to obtain cover.

Law Society chief executive Desmond Hudson said: ‘As last year, the Society has made special arrangements for those legal practices faced with entry into the ARP to seek insurance in the market and thereby avoid it, or indeed exit the ARP within the first 30 days.’

The Law Society’s PII helpline can be contacted on 020 7320 9545.