LONDON, 1 October, 2006 – Under Law Society regulations all law firms in England and Wales are required to renew their professional indemnity insurance by 1^st October 2006. Aon Professional Risks (APR) – Aon’s professional indemnity business – offers the following observations on how solicitors have been affected this year:

• It’s a buyers’ market which is in its soft cycle with significant levels of competition in the insurance market leading to a further decrease in premium rates (ie. premium divided by fee income) of around 25%.  This is a continued downward trend from last year with buying patterns of most firms remaining constant in terms of limits and excesses.
• Aon Professional Risks believes that, for the first time, the Assigned Risk Pool total premium declaration will fall below £200m.
• Larger law firms are buying their cover from brokers with whom they have a long established relationship. Longer term insurance deals are also being offered by willing underwriters in order to maintain the relationship.  
• The number of firms in the Assigned Risks Pool has traditionally been low which based upon this year’s renewal environment is unlikely to change.
• Firms in the US continue to have a higher risk exposure than UK firms yet UK firms tend to buy higher levels of insurance cover. The US is currently experiencing a hard market with little capacity prompting price rises.

Nicholas Gilbert, Director at Aon’s Professional Risks Division, said:

“There is a general perception that the state of pricing in the market is unsustainable as claims experience will outgrow the premium income received which will have a knock-on effect for long term stability in the market.

“This year, many firms have left it very late in the day to make their purchasing decisions.  We believe that the point will come at which leaving it too late will start to hurt these businesses. Although market forces mean that it will always be a buyers’ market, risk management needs to be viewed as a key priority particularly for the smaller players. 

“We anticipate that the market will harden going forward and would expect premium rate increases to be caused by one of a number of factors. These might include a rise in reinsurance costs, some form of new industry regulation or a serious withdrawal from the underwriting market.”

Notes to editor:

About Aon

Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

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