What is the indemnity fund?
The Solicitors Indemnity Fund (SIF) was established in 1987 to provide compulsory professional indemnity cover to all solicitor firms in private practice in England and Wales. With the agreement of The Law Society of England and Wales, the fund has provided Expired Run-off cover to firms that ceased without successor since 1 September 2000 but only after the primary run-off period of 6 years had elapsed.
SRA-run indemnity arrangements
After years of discussion, it has been agreed that solicitors will be protected from the impact of long-tail negligence claims after the Solicitors Indemnity Fund closes in September 2023. The SRA have announced that the SIF will be replaced with SRA-run indemnity arrangements from September 2023.
What is the SRA-run indemnity arrangement?
The board has announced that the new SRA-run indemnity arrangements will provide the same level of cover as the SIF. This includes consumer protection for post-six-years negligence. This will probably come as a relief to many solicitors who feared that the closure of the SIF could result in an end of post six-year run-off cover. For most it would have been extremely difficult to find alternative cover with the same level of protection in the open market.
The SRA published a discussion paper in August 2022 where three options for replacing the SIF were considered. The other options were to maintain the current SIF or convert the SIF into a discretionary compensation fund.
A public consultation will be launched before the end of September regarding the arrangement and rules for the SRA-run indemnity scheme. There are a few issues that still need to be addressed including funding, a possible periodic levy and the remaining funds left in the Indemnity Fund once it closes. In late 2021 the SIF had just over £20m in net liquid assets. This could be used to fund the new scheme.
How can we help?
Hawsons is one of the few accountancy practices with a dedicated team of solicitor accountants specialising in the needs of solicitors and legal professionals.
We act for a large number of law firms across all three of our offices and offer a wide range of services which are tailored to meet their individual needs. Our legal client base consists of a multitude of firms of varying structure and size, from sole traders to limited companies and LLPs with corporate members.
Our understanding of the unique issues that many in the sector are facing, combined with our technical experience, allows our solicitor specialists to provide you with proactive, commercial and informed accountancy and tax advice.
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