PracticeAccounting FirmsNo hikes in accountants’ legal cover says Marsh

No hikes in accountants' legal cover says Marsh

Cost of professional indemnity insurance covering the profession in legal battles has not shot up and has actually decreased in some cases

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.

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