Consultation on SIF replacement

The Solicitors Regulation Authority (SRA) is consulting on the arrangements and rules of an SRA-run indemnity scheme to provide future consumer protection for post six year negligence in the form of post six year run-off cover (PSYROC). 

The Solicitors Indemnity Fund, operated by the Solicitors Indemnity Fund Limited, was extended from 30th September 2021 for a further 2 years following an overwhelming response to the SRA’s February consultation.

The new SRA-run scheme will “offer the most cost-effective and proportionate solution to providing appropriate consumer protection for post six-year claims” according to the SRA, and will come into effect from September 2023.

All regulated law firms are required to have indemnity insurance which covers them for any claims made in the six years after they close. The SRA-run indemnity scheme will provide protection, as the SIF does currently, for consumers who suffer financial loss due to a solicitor’s negligence, where a claim arises after this period and the closing firms had no successor practice.

Anna Bradley, Chair of the SRA Board, said:

“Appropriate protection for those using regulated law firms is essential, but we also need to make sure the approach is cost effective and proportionate. That is important for both consumers and law firms. We are setting out the details of the SRA-run indemnity scheme that we will be introducing and look forward to hearing everyone’s views on the arrangements and rules.”

In August 2022 the SRA published a discussion paper outlining the case for ongoing consumer protection and the options for delivering this.

The new consultation explains why the SRA decided ongoing consumer protection is needed, and how it came to the decision that an SRA-run indemnity scheme was the most proportionate way forward on grounds of cost-effectiveness, governance and consistency with other regulatory arrangements. The paper invites views on the draft rules for the scheme, and commits to consulting separately on the structure of any levy that may be proposed in future to help fund the scheme.

Consultation on the rules and arrangements for the SRA-run scheme will run for 12 weeks until Tuesday 3rd January, 2023.

In response, Law Society of England and Wales president I. Stephanie Boyce said

“We will thoroughly examine the new proposals, but I can say now we are positive about the way in which the SRA’s position on PSYROC has evolved, and glad they now agree it is necessary to protect the long-term interests of consumers.

In terms of how the scheme will work, the SRA will take over the existing SIF, rather than establishing a brand new scheme.

We are pleased the new SRA indemnity scheme mirrors the indemnity cover provided by SIF and that the arrangement is intended to provide protection on terms equivalent to the indemnity insurance provided under the SRA’s minimum terms and conditions.

Bringing the fund in-house will also allow them to monitor claims data, which could enable them to better identify and regulate long-term risks, to the benefit of solicitors and consumers alike.”

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