The assigned risks pool (ARP) should be scrapped and law firms should instead be given a three-month grace period by insurers in which to either find alternative professional indemnity insurance (PII) cover, merge, or close down, the Law Society is to recommend.

Outlining the Society’s proposal, chief executive Des Hudson told the Gazette today that this ‘extended reporting period’ would ‘remove some of the worst excesses of the ARP but not the protection for firms and their clients’.

Chancery Lane is proposing that the Solicitors Regulation Authority amends the terms of its qualifying insurers agreement so that insurers are required to notify firms whether or not they will offer them a PII renewal six months in advance. If insurers do not offer a renewal, firms must find cover on the open market before their policy expires.

If firms fail to find cover on the open market before their policy expires, the Society proposes that firms should be covered by their insurer for an additional three-month period, at a rate based on their existing premium. During this time, firms must secure alternative cover, or merge with another firm, or close down.

Hudson said that the Society is seeking views on its extended reporting period proposal from the profession and other stakeholders, before it submits its response to the SRA’s consultation on the reform of indemnity arrangements. The SRA has recommended maintaining the ARP, but allowing firms to remain in it for six months rather than 12 months.

‘Many commentators argue that our current arrangements are acceptable,’ Hudson said. ‘We understand that, but we have to recognise that there is a proposition on the table from the SRA, which we believe is less suited to our members and the public than the current system.’

Hudson said that insurers will be able to choose the risks they wish to insure, rather than insuring the risks they don’t want to insure by paying out proportionally on claims made against firms in the ARP.

The full Law Society proposals can be seen here.