Proposals for the SRA’s compensation fund to meet uninsured firms’ negligence claims seem oddly familiar, says Philip McCormack
Midnight, 31 August 2000. Tony Blair was yet to complete his first term in 10 Downing Street. The millennium bug hangover had not fully worn off. And the legal profession was on the brink of parting ways with its Solicitors Indemnity Fund (SIF). As many will recall, the Solicitors Indemnity Rules stipulated that all firms make contributions to the SIF. They were to do so at varying levels, according to their turnover and claims history. In return, they were entitled to up to £1m of cover. A deficit of more than £450m, accelerated by discounted contributions failing to meet liabilities, precipitated the SIF’s demise.
Then came demutualisation and, with it, the birth of the Assigned Risks Pool (ARP). This new fund of last resort facilitated cover for firms which were unable to obtain it on the open market, and provided run-off cover for those firms whose insurers had gone insolvent. The open market initially provided a seemingly lucrative opportunity for participating insurers. However, over the past decade,
