No hikes in accountants' legal cover says Marsh

Fears of professional indemnity insurance premiums rocketing have proved unfounded according to Marsh, the world’s leading insurance broker and risk adviser.

Troy Russell, a senior vice president in Marsh’s Financial and Professional Practice, found that an influx of new players in the professional indemnity market has seen insurance costs staying level across the market with the costs reducing in some instances.

'In some cases there have even been premium reductions at renewal. This bucks the trend of other professions and financial institutions, where conditions are more challenging,' Russell said.

The record number of insolvencies in the UK is having little impact on the current soft market for accountants’ and auditors, Marsh said.

'For accountants, insolvencies can be a "red flag" for potential litigation, as a number of parties, for example, clients, creditors or liquidators, seek to recoup losses they believe have arisen from poor or inappropriate accountancy advice,' Russell said.

'If an accounting firm is making more claims on its insurance, it will inevitably be faced with higher insurance costs at renewal.'

However when claims did come in, Marsh found insurers were wanting to settle more swiftly in order to limit their litigation costs.

'This sits comfortably with claimants favouring quick cash settlements. The trend is for quicker settlements, for less.'

Despite Moore Stephens' victory in the House of Lords, Russell warned that auditors would still have to be on their guard in cases where businesses were not effectively owned and controlled by one individual.

'In the current environment, with discovery of fraud increasing, accountants and auditors will need to demonstrate more than ever that sufficient care has been taken to discover any anomalies in accounts,' Russell added.