Jessica Jarvis

Quietly, with no pomp or circumstance, the Office of the Public Guardian (OPG) announced a significant change to the surety (security) bond scheme for Court of Protection deputies. While the news may not have made headlines, it signalled a substantial shift in the way the OPG ensures the financial protection of vulnerable individuals, colloquially referred to as ‘P’.

For those accustomed to the steady rhythm of the existing system, this change was unexpected, despite the OPG’s knowledge that the existing contract with Howden UK Ltd, established on 1 October 2016, was set to expire in March 2023. Surprisingly, there was no prior consultation or discussion about this transition, leading to a degree of uncertainty about what lies ahead.

Following a procurement exercise, the OPG has moved from a single preferred supplier, Howden, to three separate providers: Marsh, Howden, and Insync Insurance Solutions Ltd. The Howden contract had been awarded based on their ability to provide the best value for clients, and while deputies could always opt for a different bond supplier, Howden had been the go-to choice for many.

The ink is still fresh on this new arrangement, and the ramifications are yet to be fully understood. However, the change promises to affect the existing landscape in several ways, most notably in the calculation of bond values and the protection of P’s financial interests.

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Under the OPG’s new scheme, the OPG requires evidence from the insurer that the bond has been arranged before releasing the Deputy Order. Although this adds an extra safeguard, it fails to address an underlying issue: ensuring the RIGHT level of security for P.

The critical aspect is that the calculation of the bond’s value has historically been inconsistent, despite the apparent difference in risk profile for professional and lay deputies. Data since 2007 reveals a uniform premium rate for bonds provided to both lay and professional deputies up to £1M. Rates started at 0.5% (translating to a £25 annual premium for a £5,000 bond), decreasing to 0.25% at £40,000 (£100 p.a.) and continuing at that rate (i.e., £25 p.a. for each £10,000) up to £150,000 (£375 p.a.). Rates gradually reduce above that level to 0.2% p.a. for a bond of £250,000 (£500 p.a.) or above. Thus, a £500,000 bond commands a £1,000 p.a. premium and a £1M bond, £2,000 p.a.

The effects of the Act’s introduction are further highlighted by statistics comparing the years ending 1st October 2007 and 2008. Although there was only a 10% increase in the number of live bonds in force (from 18,045 to 19,808), the total security provided by these bonds skyrocketed by 99%, from £580,700 to £1,155,800. The maximum security bond required jumped from £500,000 to £3M, with the number of bonds exceeding £500,000 climbing from nil to 121.

Even with these staggering increases, the ratio of professional to lay deputies stayed consistent at 28%:72%. This is noteworthy as it underlines the discrepancy between the scale of an estate and the level of security set, with significant estates occasionally receiving smaller security bonds.

There is a glaring need for a more systematic and fair approach, as underscored in a 2009 court judgment, which remains the most comprehensive guidance on the issue. Despite the passage of time, the judgment highlights the necessity of a robust procedure to establish the appropriate security level for P. It calls for a more personalised strategy, acknowledging each case’s unique circumstances.

The Judge suggested a multi-step guide to effecting this nuanced approach:

1. Initial Assessment: If substantial doubts arise about a deputy’s trustworthiness with P’s assets, the court should consider not appointing them as a deputy. Alternatively, imposing limitations on the funds under the deputy’s control might alleviate these doubts. An important factor to consider is whether the deputy should be prevented from dealing with any property occupied by P as their home without further court order.
2. Fund Evaluation: Next, the court needs to assess the amount of funds to be placed under the deputy’s control. It must contemplate the potential costs and/or losses to P in the event of a total default by the deputy.
3. Insurance Consideration: The court should then ascertain whether the deputy possesses professional indemnity insurance sufficient to replace P’s assets in case of a total default. This includes reviewing the level of asset aggregation in the hands of a single deputy relative to their insurance coverage.
4. Review of Asset Value: If there’s a lack of satisfactory insurance coverage, the starting point should be the value of assets under the deputy’s control or passing through their hands. This may require a revisit to the terms of the deputyship order to limit the value of the vulnerable assets.
5. Case with Adequate Insurance: If the deputy does possess effective professional indemnity insurance, the court should require them to deposit a copy of the insurance with the OPG. If there’s any reduction in its level, the OPG or the court should be informed immediately. The court should aim to set a security level that will cater to P’s immediate needs for a period equivalent to the time it may take to settle the insurance claim. This includes the costs of making such a claim, an allowance for any immediate unpaid debts of P, and a suitable margin for error.
6. Premium Level Assessment: After forming a preliminary view on the appropriate level of security, the court should consider the premium level. It should evaluate whether it could cause undue financial hardship to P, or if it would otherwise appear to be an unjustifiable or wasteful use of P’s resources when compared against the benefit of having that security. Special circumstances might mitigate this, but they must provide a real justification for the view that such a level of security is not reasonably necessary.

The Judge’s insight provides a blueprint for a more equitable and precise approach to setting security levels. By employing this case-by-case method, we can ensure a more effective, fair, and tailored bond scheme that accurately reflects the complexity and variance of each case. By adopting such a level of rigor and customisation, the OPG can hope to provide comprehensive protection for the interests of vulnerable individuals. This would mark a significant enhancement to the existing scheme and would bring us closer to the goal of providing a security bond scheme that truly serves its purpose.