February 2022: With just a couple of months to prepare for the April 2022 Solicitors’ Professional Indemnity Insurance (PII) renewal season, the Partners/Directors of Solicitors’ firms are being urged to plan for the likelihood that they will need to sign a Personal Guarantee as a condition of their run-off cover. This could put their homes and other personal assets on the line if the firm fails.

Professional Risks Personal Guarantee Insurance (PGI) policy can, however, mitigate that risk. Our new, annual policy has been created to help tackle the increasing demand for personal guarantees from insurers. The policy provides insurance cover for the Directors of solicitors firms that have provided Personal Guarantees for Professional Indemnity Insurance (PII) run-off premiums. The cover applies where the run-off premium cannot be met by available cash resources of the firm.

Insurers offering Solicitors’ Professional Indemnity Insurance are increasingly requesting Personal Guarantees as a means of recovery if the solicitors firm fails and enters an insolvency procedure. The insurer is obligated to provide 6-year run-off cover so if the cash reserves in the business are not enough to cover the run-off premium which is typically 300% of the latest annual PII premium, the personal assets of the Partners/Directors of the firm will be called upon.

Todd Davison, our MD explains: “With Professional indemnity insurance, cover applies at the date the claim is made, rather than at the time an error or omission causing the claim occurred. As such it may be several years after the work was completed that a claim may arise. The Minimum Terms and Conditions (MTC) for participating PII insurers state that they must provide 6 year’s run-off PII cover, whether or not the run-off premiums are funded by the solicitors firm.

Naturally, insurers want to protect themselves in the event that the firm closes due to insolvency.

“Now that a Personal Guarantee is becoming a standard requirement of Solicitors’ Professional Indemnity Insurance, it is vital that the Directors of Solicitors firms protect their personal assets through Professional Risks Personal Guarantee Insurance – a new solution that leverages our unique skills and expertise as the UK’s sole Personal Guarantee Insurance provider. We urge Solicitors firms to speak to their insurance broker at the earliest opportunity to put this cover in place if their PII depends on a personal guarantee.”