A review of ICAEW’s professional indemnity insurance requirements has taken place which included a public consultation that closed in December 2023. Wide-ranging proposals were presented and some of these are now being taken forward. Changes will come into effect from 1 September 2024.
The proposals that were presented during the consultation period included changes to the minimum level of insurance cover and maximum excess, expanding the amount of mandatory insurance firms must take after they cease to practice and making insurers liable in some situations even if the insured firm did not pay. Overall, the consultation feedback we received confirmed that the accountancy insurance market is working well. However, there was strong opposition to some of the proposals. Having reflected on the responses and wanting to ensure there were no unintended negative consequences, only some of the proposals are being taken forward at this stage.
The main changes that will come into effect from 1 September are:
- The minimum limit of indemnity will increase from £1.5m to £2m
- For firms with a gross fee income which is below £800,000, the limit will be two and a half times the firm’s gross fee income, subject to a minimum of £250,000 (this is an increase from £100,000).
- Larger firms with gross fee income over £50m will not be required to put in place ‘qualifying insurance’ but must have in place appropriate arrangements which will be monitored. (Currently this approach is available to firms with 50+ principals.)
- For firms that will be required to put qualifying insurance in place, the maximum aggregate excess should not exceed the higher of £3,000 or 3% of a firm’s gross fee income.
Be aware that the new arrangements will apply to policies taken out or renewed from 1 September 2024.
We recommend checking with your broker whether any of the changes will impact your policy and to ensure you leave sufficient time to prepare for your renewal this year.
A summary of the consultation outcome and further details about the changes will be published on our website and shared via Regulatory & Conduct News shortly. There will be additional reminders regarding the changes as the implementation date approaches and we will also host a webinar and Q&A session later in the year. Look out for the details in future issues of Regulatory & Conduct News.
