Firms have become ‘tainted’ by the Enron affair, and those with substantial audit businesses are facing the prospect of paying massive increases in their PI cover.
Ian McCallum, UK director of financial lines at Marsh, the largest insurance broker in the world, said the rises began to take effect before Enron and are set to continue. He added: ‘Accountancy firms involved in areas such as insolvency and tax are seeing their rates jump up from 25%, while others have seen premiums doubling.’
The rises of up to 100% are substantially higher than previously expected. Accountancy Age was told in January that rises would only reach 60%.Although firms do not like to discuss their PI cover, industry insiders are reporting the price of the insurance ‘has gone ballistic’ and was beginning to ‘hit hard’, especially smaller firms.
The Enron issue has been the largest contributor to the price hikes, but September 11, Independent Insurance and a reduction in the number of PI insurers have also affected the cost of policies.
Smaller and mid-tier firms will find it harder to cover the costs, and may be forced to reduce levels of cover or increase excesses.
Lee Hudson, professional indemnity underwriter at Hiscox, said he âwould not be surprised to hear’ of 100% premium increases.
‘Enron has made underwriters very wary,’ he added.
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