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The risks of peer to peer lending

09 January 2020. Published by Ben Goodier, Partner and Katharine Cusack, Partner

Insurers are on the watch for a potential increase in claims arising in 2020 from peer to peer lending.

The difficulties in accessing finance since the economic crisis, and the reduced number of lenders willing to make loans at a high loan to value ratio has led, in recent years, to a rise in peer to peer lending. This involves a particular class of lender providing access to finance for borrowers without the requirement for them to go to the bank. Significantly, many of these peer to peer loans are at the "subprime" end of the market. Unsurprisingly, this has led to a concern amongst surveyors and their professional indemnity insurers that their valuation reports and surveys could be relied on by multiple investors in the particular lending scheme, with whom the surveyor has had little or no contact, thereby leading to multiple claims arising from one report.

 As always, surveyors should keep the scope of any standard reliance clause used in their reports under close review and as limited as possible. 

Although prudent for insurers to keep an eye on any such development, were multiple claims to be brought against a surveyor arising out of just one report, we anticipate that the Courts would apply the doctrine of reflective loss, to prevent the surveyors facing the risk of liability to multiple parties, adopting the same approach as the Court of Appeal did in the case of Titan v Colliers, in connection with securitised lending.