SRA confirms indemnity fund replacement
After years of lobbying, solicitors will now definitely be protected from the potentially ruinous impact of long-tail negligence claims after the closure of the Solicitors Indemnity Fund.
The Solicitors Regulation Authority (SRA) has today (14 September) announced that existing SIF arrangements, as operated by Solicitors Indemnity Fund Limited (SIFL), will be replaced with SRA-run indemnity arrangements from September 2023.
The decision to introduce SRA-run indemnity arrangements will also maintain consumer protection for post-six-year negligence as a regulatory arrangement – with the same level of cover as the SIF, the board said.
In a discussion paper published last month the SRA set out three options for replacing SIF, which provides post six-year run-off cover (PSYROC) for firms that closed without a successor practice. The others were to maintain the current SIF or convert SIF into a discretionary compensation fund.
Anna Bradley, chair of the SRA Board, said:
“We have been looking at how best to maintain consumer protection for negligence claims brought more than six years after a firm has closed in a cost-effective and proportionate way and have decided that an SRA-run indemnity scheme is the right way forward.
“This approach will provide that important protection for those who need it, while giving us clear oversight of how the indemnity operates, enabling us to run the scheme efficiently and realise potential cost savings.”
The SRA will launch a public consultation before the end of September on the arrangements and rules for the SRA-run indemnity scheme. Issues that need to be addressed include how the scheme will be funded, including the possibility of a periodic levy, and what happens to any surplus left in the current fund when SIF closes.
SIF had liquid net assets of over £20m in late-2021. It is understood that this money could be used for indemnity purposes upon the introduction of the new scheme.
The Law Society said it was ‘pleased’ the SRA will maintain consumer protection for PSYROC with the same level of cover as the SIF via its own fund.
Law Society President I. Stephanie Boyce said:
“This is likely to be a relief to the many members, and former members, who have been worried that the closure of SIF would mean the ending of PSYROC as a regulatory arrangement, when for most there was little prospect of finding alternative comparable protection on the open market.
“The Law Society called for the establishment of an indemnity scheme, ring-fenced for PSYROC claims and offering the same scope of protection currently provided by the SIF.
“We look forward to working constructively with the SRA on the details. We want to be certain that the new scheme will be affordable in the long-term, providing good value for money, and maintaining the strong protections that have benefited clients and solicitors alike under the SIF.”
Frank Maher, a partner at Legal Risk Solicitors, commented:
“The SRA’s announcement may be a step in the right direction, and our criticism that their suggested alternative (a compensation fund) might be unlawful has perhaps been taken on board, but we will have to await – and scrutinise – the more detailed proposals. It is hard to see how it might be more efficient when SIF has been costing the profession nothing for two decades and is run by a very small number of staff.”
Kindly shared by The Law Society Gazette
Main article photo courtesy of Pixabay
