PII: Favourable environment
Law firms have been spending a smaller share of their revenues on professional indemnity insurance (PII) and those turning over £5-10m are saving the most.
According to leading broker Lockton, more than a quarter of the 1,600 firms it advises are now also renewing their PII for periods of longer than the traditional 12 months.
“Capacity continues to exceed demand, with established insurers seeking to defend market share, while new entrants continue targeting the legal sector.
“Meanwhile, competition is as strong as it has been for many years, particularly in the primary insurance layer.
“The result is a favourable environment for buyers, particularly where firms can demonstrate strong financial performance, effective governance, and a mature approach to risk management.”
Lockton said the cost of the primary layer of PII as a percentage of law firm revenues fell on average by 11% in 2025/26. This rose to 12% for firms with turnovers of at least £25m and over 15% for firms with turnovers of £5-10m.
Lockton said that, during the past year, there had been a “significant increase in the availability of longer-term policies”, typically of 18 months, and more than a quarter of firms secured them in the past year, compared to 20% in the previous 12 months.
“The growth of longer-term policies reflects both insurer confidence in the sector and clients’ desire to lock in highly competitive pricing while conditions remain favourable.”
While 46% of firms still renew in October, and a further 21% in April, Lockton predicted that more would continue to renew outside either of these traditional dates.
In this year’s Solicitors’ Professional Indemnity Insurance Market Report, the brokers said there had been a sharp rise in the proportion of law firms opting for ‘co-insurance’, where two or more insurers agreeing to share the risk.
The ‘lead’ insurer manages the policy administration and handles any claims while passing an agreed percentage of both premiums and claim payouts to the ‘following’ insurers.
From 7% of firms in 2023/24, co-insurance grew to 10% of firms in 2024/25 and 23% in 2025/26.
“What has notably shifted in recent years is the appetite for insurers to offer co-insurance options for firms below £20m of revenue.”
When it came to significant risks for law firms, Lockton said cybersecurity was “one of the most pressing”, as attack methods became more sophisticated and the consequences could be “catastrophic”.
Other risks highlighted were artificial intelligence, succession planning, talent retention and burnout, client pricing pressure and over-expansion. There were also regulatory risks, relating particularly to environmental, social and governance standards, and diversity and inclusion.
On regulation more widely, Lockton singled out the Mazur litigation, the tax adviser registration requirements under the Finance Act 2026, the transfer of anti-money laundering supervision to the Financial Conduct Authority, and the Solicitors Regulation Authority’s plans to split the roles of compliance officer and manager.
Lockton said the outlook for the PII market over the next 12-24 months remained positive.
“Barring any significant deterioration in claims experience or wider economic shocks, competition between insurers is expected to remain strong throughout the next renewal cycles.
“Premium rates are therefore expected to remain broadly stable, with well-performing firms continuing to achieve favourable outcomes and opportunities to secure longer-term agreements, where appropriate.
“However, insurers are likely to become increasingly selective, rewarding firms that can clearly evidence investment in cyber resilience, governance frameworks, financial stability, and proactive risk management.
“For firms experiencing rapid fee growth, expansion through acquisition, or significant changes to practice profile, insurer scrutiny is likely to increase.”