With 1 in 20 law firms falling into the Assigned Risks Pool (a regulator run insurance pool for the uninsured which charges premiums of between 27% and 47% of turnover), the next 12 months is looking extremely bleak for small law firms.
Most small law firms do at least some conveyancing and a drop in fee income coupled with massive premium hikes for the 1 October 2009 renewal will prove a fatal blow for many.
I recently advised a partner in a three partner law firm – their PI annual premium went from £20,000 to £80,000. The partnership dissolved as a result of the financial pressure and we got the partner into an IVA where he is now running his own law firm.
After the last recession, many conveyancing related claims came out of the woodwork and of course it is the insurer who covers at the time of the claim (rather than the negligence) who has to pay out.
This time, there is the ticking time bomb of massive mortgage fraud which the insurers face.
The profession (not just conveyancers) is therefore facing substantial increases in premiums which no longer make many practices viable.