This helpsheet has been issued by ICAEW’s Technical Advisory Service to provide guidance to ICAEW members on Professional Indemnity Insurance (PII).

PII is compulsory for all ICAEW members who have a Practising Certificate (PC) and engage in public practice. Members should refer to ICAEW’s Statement on Engaging in Public Practice if they are not sure whether a PC is needed. Individuals and firms licensed under the regulations governing audit, investment business, probate, licensed practices and insolvency are also required to comply with ICAEW’s PII regulations. The regulations provide details of what is meant by ‘qualifying insurance’, the level of cover required and the minimum policy terms. Further guidance can be found at icaew.com/pii. 

When obtaining PII or renewing existing cover members should ensure they arrange ‘qualifying insurance’ and check:

• The insurer is on the list of the current list of participating insurers (and if the insurance is provided by more than one insurer, that all insurers are participating).
• The cover meets the minimum level of indemnity per the PII regulations paragraphs 3.2-3.7
• The policy provides cover under terms which match ICAEW’s approved minimum wording and includes at least 6 years’ retroactive cover (i.e. cover for claims arising in relation to advice, services and business activities carried out during the last 6 years).

The current market has made it challenging for some members to obtain compliant PII or to renew their existing cover.

ICAEW recommends that members prepare early to ensure there is no gap in cover which would be a breach of the PII Regulations and may result in disciplinary action.

Members struggling to obtain PII should:

• Discuss matters with their broker regarding a new policy or renewal. Members should ensure that their broker understands their business and can access all insurers on the participating insurers list (i.e. that the broker is not tied to a particular insurer).
• Note that it is possible to extend the existing policy by 30 days if they have not obtained qualifying insurance prior to expiry of their current policy ( see ICAEW’s minimum approved policy wording clause D3). Consider whether the policy can be extended further.
• Get in touch with Marsh Commercial, ICAEW’s Member Reward’s Partner. Many members have been successful in obtaining insurance here when they struggled elsewhere.
• Consider entering the Assigned Risk Pool (ARP) which is the ‘insurer of last resort’ for firms that are unable to obtain cover in the open market (see below). The ARP is underwritten collectively by all participating insurers, and members can obtain 30 days’ emergency cover, followed by cover for up to two years, if needed.

In exceptional circumstances the PII committee may, at its absolute discretion, grant dispensation from particular requirements of the PII regulations to enable firms to take out cover that does not comply in full with the requirements of the PII Regulations. The circumstances in which dispensations can be granted is set out in PII Regulation 5.3 and guidance for the PII Committee in determining applications is set out in Appendix B. We recommend that members review the regulations to understand the process in more detail.

All participating insurers have agreed to provide cover under terms that match those of the ICAEW’s minimum approved wording. Many insurers use their own policy wording, and, in some instances, this will include extensions of cover beyond the cover that is required under the minimum wording. Participating insurers which use a different policy wording must also include a ‘difference in conditions’ clause in the policy.

All ICAEW compliant policies should include a DIC clause and there is provision in ICAEW’s contract with each insurer for firms to enforce this requirement.

The ARP is for firms that are unable to obtain PII in the market. It provides emergency cover for a period of up to two years but can be expensive. Run off cover can also be provided in the ARP if it is not available in the general insurance market.

Members looking to enter the ARP should:

• Read the ARP entry procedure
• Download a copy of the agreement for entry into the ARP; and
• Send a completed agreement to the ARP manager (joshua.m.garwood@marsh.com)

In order to enter the ARP, members need to arrange payment of the Initial Deposit Premium (at least £1,000 plus applicable insurance premium tax). Insurance cannot be provided if this deposit premium is not paid. A final premium will then be assessed. Further ARP guidance .can be found at icaew.com/pii.

It is important that members have ‘run off’ cover after ceasing to practice. This is to cover claims for work done while in practice but arising after the practice ceased. This requirement is in a member’s own interests whether or not a future claim is anticipated (PII regulations 2.7 - 2.8 and 6.28 – 6.30).

Where firms cease, the members in practice in the firm must ensure that compliant cover is in place for at least two years, and thereafter they must use their best endeavours to maintain compliant run-off cover for a further four years (PII regulation 2.8).

It is recommended that the terms and extent of any cover are equivalent to any previous qualifying insurance. Members should continue to assess their need for such cover each year until they are satisfied that there is no possibility of a claim being made. It is recommended that members consider maintaining run-off cover for six years after ceasing to practise.

Cover requirements when ceasing to practise

If a member is ceasing to practise (rather than the entire firm) then they are required to use their best endeavours to ensure they are covered by arrangements which comply with ICAEW's PII Regulations for at least two years after they cease to practise (PII regulation 2.7). Run-off cover may be provided under the policy of a continuing practice or a member may need to take out an individual policy.

If a member’s former practice has undertaken to include run-off cover for them in its current cover, the member must remember to check that it continues to cover them for at least two years. At the end of that time a member should consider whether they need continued cover. If thinking about retiring/an exit strategy then a member should speak to their broker about run-off cover.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.