Law firm closures due to inability to obtain insurance have increased six-fold in five years, according to a new report.
Researchers said 65 law firms in England and Wales closed until September 2020, up from 11 in 2016-17.
Auditing firm Mazars, which conducted the study, said 63 firms closed in 2020-2021 but all possible closures were not reported and the actual figure was likely higher than in the last year.
Professional liability insurance premiums have risen sharply over the past year, analysts say, and small and medium-sized firms have been hit particularly hard, with an average increase of 27% in premiums.
Mazars said the trauma of the pandemic has led to a “hard market” for property and casualty insurance as losses from business disruptions have resulted in higher insurance premiums.
âThe premium increases came as insurers sought to reduce their exposure to what they see as a largely unprofitable market or even abandon it altogether,â Mazars said. âCombined with the lack of new insurers entering the market, this left law firms with limited options to find a better deal. “
Julien Irving, Partner, said, âThe sharp increase in the cost of professional liability insurance this year has proven too burdensome for some law firms. Last year’s jump comes on top of many years of premium increases that have long been difficult for some companies to meet â.