Webinar recording
ICAEW and members of our PII Committee explain the detail of the changes in our webinar.
Assessing the impact
We want to avoid making changes that reduce the number of participating insurers as this could negatively impact competition or introduce measures that adversely affect the availability of insurance. We also want to maintain the viability of the Assigned Risk Pool, which offers insurance to firms who are unable to source open market cover.
The proposals being adopted will likely benefit both firms and consumers. The requirement that the minimum limits of indemnity are increased should ensure that there is a larger amount available for payment of claims and should reduce the likelihood of underinsurance.
Proposals taken forward
Having reflected on the consultation feedback, the proposals taken forward (some have been modified accordingly) are:
| Summary of the main changes | Regulation |
| Generally, firms will be required to have a £2million limit for any single claim and in the aggregate. | 3.2 |
| For firms with less than £800k in fee income, the minimum limit will be equal to two and a half times its gross fee income, with a minimum of £250,000 (an increase from £100k). | 3.3 |
| If a firm’s gross fee income is over £50m they will not be required to put in place qualifying insurance, but will need to have in place appropriate arrangements to ensure they are able to meet claims arising from being in public practice. | New- 3.8 and 2.5 |
| For firms required to put in place qualifying insurance, the maximum permitted aggregate excess will not exceed the higher of £3,000 or 3% of a firm’s fee income. | 3.7 |
| Firms insuring in a group arrangement can be treated as a single entity for the purposes of the PII Regulations providing that they meet certain criteria. | New- 3.9 |
| Members and firms should use ‘all reasonable steps’ to put in place run-off cover. Firms are still required to have cover for two years, they then must take all reasonable steps to ensure cover is in place for a further four years. | 2.7 and 2.8 |
| The guidance relating to dispensations has been updated and a fee will be introduced for firms making an application. | 5.3 and Appendix B |
| The regulations and guidance have been reviewed and updated generally to ensure they are clear and easier to understand. | All |
Proposals to be withdrawn
The following proposals were consulted on, but did not form part of the changes that were introduced on 1 September 2024.
- The proposal to extend run-off cover to six years, and to make it non-cancellable for non-payment of premium, is being withdrawn. The current arrangements relating to run-off cover (except the removal of ‘best endeavours’) will be maintained. There was strong opposition to this proposal and the PII Committee felt there was insufficient data to justify introducing this change given the potential impact on the market.
- The proposal that insurers should meet any unpaid excess is also being withdrawn. There is little evidence that this is currently a significant problem and the amount a firm can take as an excess is already capped at an aggregate amount.
- The proposal relating to flexibility for defence costs and the excess is not being taken forward. The PII Committee considered that the current arrangements work well and offer a useful protection for firms.
Timeline
The updated regulations came into effect on 1 September 2024.
There will be a transitional period and the new requirements relating to minimum limits and excess will only apply to new policies once a firm renews its insurance after 1 September 2024.
The new requirements will apply to all firms from 1 September 2025.
We encourage firms to speak with their broker and to consider any further information that may be required to process their renewal for the 2024/2025 policy year.
PII changes FAQs
Read our FAQs to help understand the changes and assess whether you will need to make changes to your firm’s professional indemnity insurance.
Frequently asked questions
We have set out responses to some FAQs to help you understand the changes
Read the FAQs
