BSB: existing monopoly “has operated in public interest”
All but one of the entities authorised by the Bar Standards Board since the beginning of this month consist of a single barrister, with the other made up of two barristers, it has emerged.
The news came in a consultation issued last week by the Bar Standards Board (BSB) that suggested extending the monopoly currently enjoyed by the Bar Mutual Indemnity Fund (BMIF) in insuring self-employed barristers to single-person firms.
The BSB starting regulating firms for the first time this year, but has still to name the 17 entities it has authorised while it confirms their insurance provision.
In the consultation, the BSB said that maintaining the current position and allowing single-person firms to insure themselves on the open market could have an impact on the “sustainability” of BMIF, “should significant numbers of the self-employed Bar seek to incorporate their practices, take out insurance elsewhere, and leave the mutual”.
The BSB said the rule changes being considered would only apply to single-person entities.
“The BSB believes that the existing rule, under which the mutual has a monopoly on providing the primary layer of cover to the self-employed Bar has operated in the public interest by providing barristers with a stable source of primary layer cover.
“An extension of the monopoly to single-person entities will help to achieve a level playing field between individual barristers operating on a self-employed basis or through single person entities.
“It will also avoid an adverse impact on the viability of the mutual in the event that a significant proportion of individual barristers (as a proportion of the BMIF’s premium income) go to alternative providers.
“Extending the BMIF monopoly to single-person entities will ensure the mutual model can continue to operate in the public interest in future. It will still be the case (as it is for self-employed barristers now) that single-person entities can look to the open market for any top-up cover beyond the BMIF’s maximum.
“As the market develops, the BSB will review its position on multi-person entities. At present, there is no evidence available to suggest that the rate or extent of take up of multi-person entities, which may seek to insure with an insurer other than the BMIF, will be as likely to challenge the viability of the mutual.”
The regulator said that when the BMIF responded to the BSB consultation on regulating entities, it warned of the threat to its sustainability should “large numbers” incorporate and “significantly reduce” membership of the mutual. The BSB said these arguments were “persuasive”.
The BSB said it had tested the appetite of commercial insurers for insuring single-person entities. Of the 26 insurers they approached, only eight responded with a definite ‘yes’.
The regulator said that, since departing from its mutual model, the market for solicitors’ indemnity cover had experienced “significant instability” which had “adversely impacted consumers”.
The BSB went on: “The SRA’s experience (and that of the Bar before the BMIF was set up) suggests sole traders are more likely to find themselves unable to renew their cover in a purely commercial market.
“And so the BSB would have to consider alternatives (such as an assigned risks pool) if the existing monopoly were not to be maintained and extended to single person entities.”
The BSB added that, at the time of writing the consultation paper, most of the entities that applied for authorisation had indicated that BMIF would be its preferred choice. BMIF is offering primary layer indemnity cover at the 2015 renewal to all single-person entities on the same basis as for self-employed barristers.
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