Insurers increasingly requiring Personal Guarantees for run off claims
February 2022: As the April 2022 renewal season for Solicitors’ Professional Indemnity Insurance fast approaches, insurance brokers will be under pressure to help the Partners/Directors of Solicitors’ firms cut the risk of personal guarantees now being demanded by some insurers as a condition of cover. We are urging brokers to include our Professional Risks Personal Guarantee Insurance (PGI) policy in their armoury as they face another challenging renewal period.
In recent years, there has been more scrutiny around the financial position of SME law firms with certain participating insurers requesting Personal Guarantees from the partners and leaders of small LLPs and incorporated businesses when offering Solicitors’ Professional Indemnity Insurance. This is to provide the insurer with means of recovery in respect of the run-off premium in the scenario where the solicitors firm fails, enters an insolvency procedure and the insurer is obligated to provide 6-year run-off cover.
Professional Risks Personal Guarantee Insurance (PGI) is an annual policy providing insurance cover for the Directors of solicitors firms that have provided Personal Guarantees to insurance companies in respect of Professional Indemnity Insurance (PII) run-off premiums. The run-off premium is typically 300% of the latest annual PII premium. The cover applies where the run-off premium cannot be met by available cash resources of the firm.
Todd Davison, our MD, said: “During the past year we have seen increasing interest from Solicitors firms for Personal Guarantee Insurance specifically for Professional Indemnity cover. Our Professional Risks PGI helps protect the personal assets of the Directors of Solicitors firms and offers brokers a powerful proposition with commission opportunities as they prepare for the April renewal season.”