Solicitors facing issues with professional indemnity insurance renewal

As the traditional 1 October professional indemnity insurance (“PII”) renewal date approaches, law firms across England and Wales are once again being urged to start their renewal process early. The legal market continues to face unprecedented challenges, from economic instability and high interest rates to rising claims and cyber risk, meaning that the hard PII market is showing no signs of easing. Firms are facing another year of rising premiums, tougher underwriting, and, in some cases, difficulties in securing cover at all.

The Law Society and specialist brokers are warning solicitors to prepare renewal submissions well in advance. A significant proportion of firms still leave presentations until the final weeks before 1 October, with some missing the deadline altogether.

This not only increases the likelihood of higher premiums or reduced cover but also risks triggering entry into the extended policy period, which must be reported to the Solicitors Regulation Authority (SRA). Importantly, the extended policy period is not a safety net for firms to buy more time, but rather a punitive measure signalling risk to regulators and stakeholders.

Why are law firms facing such difficulties with Professional Indemnity Insurance renewal?

The challenges facing law firms seeking PII in 2025 stem from a combination of regulatory, economic, and risk-driven pressures:

SRA Minimum Terms and Conditions (MTC)

The SRA’s strict minimum terms continue to make solicitors’ PII policies less attractive to insurers. Unlike other professions, solicitors benefit from extensive protections for clients under the MTC, which effectively guarantees wide-ranging cover with very limited exclusions. While this provides security for clients, it reduces profitability for insurers and discourages new entrants into the market.

Claims Inflation and High-Value Settlements

Although the volume of claims against solicitors has not surged dramatically, the value of claims has increased sharply. Rising property values, complex probate disputes, and high-value corporate matters means that claims payouts are often exceeding the total premiums collected across.

Conveyancing, wills and probate, and commercial litigation continue to be seen as high-risk areas, making firms specialising in these areas particularly vulnerable to premium hikes.

Cybersecurity and Data Breaches

The rise in cyber-attacks remains one of the most significant emerging risks. Law firms are attractive targets due to the vast quantities of sensitive information they hold. Even smaller firms are not immune, with phishing and ransomware incidents on the rise. While some insurers now require firms to demonstrate robust cyber security measures as part of the PII renewal process, many firms are struggling to meet the standards expected.

Economic and Market Conditions

The legal sector continues to be affected by broader economic uncertainty. While the UK has narrowly avoided a deep recession, sluggish growth, high borrowing costs, and inflationary pressures are all impacting law firm revenues and resilience. Insurers are wary or struggling firms, viewing them as a greater risk for management and claims.

Reduced Insurer Appetite

The number of insurers actively writing solicitors’ PII remains limited. Consolidation among insurers and a cautious approach to underwriting means that capacity is restricted, keeping premiums high and reducing competition in the market.

What happens if solicitors cannot renew their insurance?

Maintaining PII is non-negotiable for any law firm authorised by the SRA. Without valid cover in place, firms cannot legally practise, and any lapse in insurance places both the firm and its clients at significant risk. The SRA has put strict measures in place to manage situations where firms are unable to renew their cover on time.

Extended Policy Period (30 days)

If a firm fails to secure a professional indemnity insurance renewal by the 1 October deadline, its existing policy will automatically provide an additional 30 days of cover. This period is designed to give firms extra time to obtain a new policy without immediately disrupting client work. However:

• The extended period is not a grace period to be used strategically; it is a red flag to insurers and regulators that the firm may be struggling.
• Firms must report entry into this period to the SRA, which can impact their regulatory record and future insurability.
• Insurers may view reliance on the extended policy period as a sign of poor management or weak financial stability, which can further complicate renewal negotiations.

Cessation Period (60 days)

If a firm is still unable to obtain cover after the extended 30 days, it will automatically enter the cessation period. This lasts for 60 days and is intended to give firms time to arrange an orderly wind-down or transition. During this period:

• The firm may not accept new instructions or open new client matters.
• The firm may only continue to work on existing cases to protect the interests of current clients.
• The firm must make concrete plans to either:
  • Close the practice in compliance with SRA rules,
  • Merge with another firm, or
  • Arrange for acquisition by a firm that has valid PII cover.

Consequences of failing to comply

Failure to secure cover, or to properly manage closure/transition during the cessation period, has serious consequences:

• Regulatory action by the SRA, including intervention into the firm, suspension of practising certificates, and potential disciplinary proceedings against managers.
• Client harm and reputational damage if cases are left unmanaged, which could also lead to negligence claims.
• Personal liability for partners or directors, who may be pursued if they fail to properly safeguard client money or matters during closure.

From a regulatory perspective, the SRA has broad powers to step in where firms are non-compliant. This can include intervention into the practice, suspension of practising certificates, or disciplinary proceedings against managers. Such action can be career-defining, with regulatory findings making it difficult for solicitors to obtain insurers willing to offer cover in the future.

Once a firm has been flagged for intervention, it will also attract heightened scrutiny during any subsequent renewal process, with underwriters less willing to take on the risk of a potential claim.

How can Recovery First assist?

Recovery First can assist firms wishing to exit specific areas of law. You may decide to exit a high-risk market to ensure you obtain adequate professional indemnity insurance for the rest of the firm. Alternatively, you may be struggling to obtain professional indemnity insurance cover, and therefore, you may wish to merge your firm or plan an orderly closure.

Whatever route you choose to take for your firm, Recovery First can assist in the process by transferring your files to the most appropriate firm on our panel of solicitors, ensuring the most positive and profitable outcome is achieved for your firm.

An additional benefit being that the firm’s clients not only get a seamless transfer, but they are also married up with a firm specialised in their particular needs.

The unique scheme offered by Recovery First is suitable for law firms and professional advisors, including restructuring and insolvency solicitors, insolvency practitioners and accountants. Our team manage the transfer of files from start to finish, placing case files with an approved law firm so as to protect the integrity of the client’s case.

We will provide you with all the advice and support you need, and we guarantee 100% confidentiality for all our clients. If you would like to find out more about Recovery First’s process, feel free to get in touch with our Director David Johnstone at david.johnstone@recoveryfirst.co.uk or 07887796989 or our Director Sally Dunscombe at sally.dunscombe@recoveryfirst.co.uk or 07774205870.