The Solicitors Regulation Authority (SRA) have issued a statement in relation to the next steps in connection with the post-six year run off issue and the closing of the Solicitors Indemnity Fund (SIF).
The position was that the SRA were keen to see an end to the cover being provided. They pointed to the fact that 90% of claims were made in the 6 year run-off period and took the view that the expense was not one that was”prudent”. The SRA have acknowledged that the consultation which they carried out earlier in the year revealed that the majority of the 333 respondents did not support ending the requirement for the cover, with key themes in the feedback including the potentially significant impact on the small number of individual consumers who make claims, and that the profession was willing to contribute toward funding any future arrangements.
In the light of this, the Board of the SRA considered the arguments and evidence put forward and agreed in April to seek, subject to affordability, a further 12-month extension to the fund to September 2023 thus allowing the various options to be explored more fully before a final decision was made.
The SRA Board met again on 28 June to look at the affordability of a 12-month extension to the deadline for post six-year run-off claims to the SIF, including a formal offer from the Law Society to jointly provide an undertaking to the SIF. In the improbable event that any liability is incurred – which is unlikely to happen in the short term – both the SRA and the Law Society recognise that the funds would need to be recouped from the profession at a future date. It was confirmed to the Board that this would be through an Indemnity Contribution from the profession, which the SRA would collect under the existing SIF arrangements, and would only be to enable this extension. It would not set any precedent for the future of post six-year run-off cover or the SIF.
If an Indemnity Contribution was needed, the amount to be paid by law firms would depend on the sums required. So, for example, if the full £6mn was used to meet fund liabilities, it could be recouped by a flat rate call on firms, based on current firm numbers, of a minimum of around £620 a firm.
After thorough consideration, the SRA Board has decided that it would be both right and simplest for the SRA to provide the full Undertaking that SIF Limited needs for the extension to September 2023, while it continues to work on the longer-term options. This is because, in addition to having responsibility for indemnity and insurance, including any extension to the SIF provision of post six-year run-off cover and the application required to put it in place, the SRA would also be responsible for collecting any Indemnity Contribution from the profession, if it were to be needed, regardless of the provider of the Undertaking.
Over the next few months, the SRA will be continuing to carry out detailed work on next steps for the SIF and post six-year consumer protection. It is likely that the SRA will consult on the matter again.