Insurance premiums for professional liability insurance are a way of life for managing partners. However, most managing partners would probably agree that this type of insurance is only really of interest when you need to make a claim. Most of time the annual insurance renewal is something of a routine chore, perhaps even a grudge purchase; and for firms with little or no claims, it is easy to wonder if it is not all a waste of time and money.
A number of law firms are using alternative ways of ensuring they keep the professional liability insurance they need, and are required to have, while allowing themselves to benefit from good loss records. This alternative option involves self-insurance of all or a portion of this risk, using a specially created offshore company known as a captive. Setting up such a captive could lead to cost savings and further improvement of the risk management process. In some cases, this has even allowed firms to turn a cost centre into a profit centre.
