Is Professional Indemnity Insurance Compulsory?

Professional indemnity insurance for accountants covers

Participating insurers

ACCA is hearing from an increasing number of members who are struggling to obtain suitable run-off insurance. Ordinarily, run-off cover is arranged in one of two ways: by setting up a six-year block policy, which is paid for in advance by setting up an annual policy, which is then renewed each year for six years. Traditionally, run-off insurance can only be arranged with the insurer who provided the PI cover while the practice was trading. Very few insurers, if any, will now consider providing run-offer cover for a risk that had been held insured with another underwriter prior to retirement/cessation. Moreover, any insurer will also require to have held the risk for at least two years before they will even consider providing a six-year block of cover.

10.1 PI minimums

With few options available previously, the process is now even further fraught with difficulties, due largely to the prevailing hard market conditions for PI generally. Some insurers and managing general agents (MGAs) have withdrawn from the PI market for accountants completely, while others are reducing their overall exposure to risk and so are no longer able to offer the six-year run-off blocks of cover. Similarly, seeking to curtail their exposure, insurers may only provide minimum limits of indemnity or restrict cover further by providing a single total limit on aggregated basis over the period of cover. All of this means that retiring accountants have a real problem effecting appropriate run-off cover. By way of a troubling example, we were contacted recently by a retired accountant, who had purchased an annually renewable run-off policy with an MGA on which a claim had been made. the cost of defending your business against

• Minimum indemnity limit typically £50,000 for members in practice
• Cover must be provided by an insurer authorized in the UK
• Policy must cover civil liability from professional business activities
• Run-off cover required upon retirement or cessation of practice

allegations of professional negligence (such as

• Claims-made policies are the standard for professional indemnity
• Extended reporting periods (ERPs) may be required for prior acts
• Insurers must be rated at least 'A' by a recognized rating agency
• Dual insurance is not permitted to meet the minimum limit
• Aggregate vs any one claim limits must be clearly understood
• Directors' and officers' liability is not a substitute for PI

giving your client incorrect or wrongful advice). If your defence should be unsuccessful, it also

Accountancy Insurance

Nevertheless, in each scenario, we strongly suggest that the policy wording be reviewed to make sure that cover is correctly in place; again, Lockton can help with this. Finally, if you have any questions, please contact your Lockton account manager for further advice or email accountants@uk.lockton.com. Lockton is ACCA’s recommended bet 100 free bets when you sign up broker for professional indemnity insurance. Specialist insurance for accountants from £5 a month* Fast, easy online quote in 90 seconds Fast, easy online quote in 90 seconds Accountant insurance covers a great deal of risks that could face you and your business, but from professional indemnity insurance through to employers’ liability insurance policies and more – Markel have you covered. Accountants insurance is an important form of business insurance designed to protect your business against the unexpected. covers the cost of damages awarded against you.

PII frequently asked questions

It’s worth noting that it’s not a single product, but rather a group of covers that can be tailored to suit you and your business needs. It can protect you against the costs involved in defending allegations of professional negligence (such as making a mistake in a piece of work), causing injury to a third party, or damage to vital equipment (or property) you use for business. Covers such as bookkeepers’ insurance for instance, will protect you allegations of poor or incorrect bookkeeping, or the theft of a laptop containing important and confidential client data. Even with many years' experience in accountancy, an unexpected circumstance could see a claim brought against you. For instance a client could claim that you have breached their confidentiality, while another might suffer an injury at your premises and hold you responsible. Making a mistake in a piece of

work could cause a financial loss to

Professional indemnity insurance for accountants

Unfortunately, the accountant had been late in returning the renewal forms and the MGA simply declined to renew the policy. In another instance, also involving an MGA, annual cover could not be renewed because the MGA simply withdrew from the professional indemnity market completely. We have received several such requests to place run-off cover midway through the six-year period when insurers depart the scene. While we are obviously happy to help, you must be aware that there are very few insurers available to assist at the present time. As bet best uk gambling sites not on gamstop such, when you are contemplating retirement or cessation of practice, you must also consider the importance of addressing the continuing need for PI cover and be sure that it is placed properly.

Do accountants need public liability insurance?

We therefore recommend that in the year or so you before you intend to close down or sell your practice, you must ensure that your PI cover is placed with a stable, A-rated insurer and that you engage the services of a specialist PI insurance broker such as Lockton to assist you with the vagrancies of the PI market. Should you be considering the sale of your practice, you also must give due consideration to run-off cover. Again, Lockton can readily assist you (or the potential buyer) with this to ensure that past liabilities can be protected appropriately. Finally, and by way of immediate comfort to those accountants who are considering retiring from ongoing practices, there is better news: their past liability should continue to be covered by the firm’s PI policy on an ongoing basis. Often after retirement, many accountants continue to practise as consultants to the firm and the majority of PI policies will continue to provide cover for such work. your client, and they may take legal

• Coverage must extend to all employees and subcontractors
• Exclusions for fraud or dishonesty are typically permissible
• Defence costs are usually included within the limit of indemnity
• Insurer must have a claims handling office in the UK

action against you to recover their losses.

What to look for with PI cover

However, the requirement for increased fidelity guarantee insurance (FGI) may limit the market for members as insurers are worried about the rise in internal fraud and therefore may not want to increase their exposure. The insurer may insist that the client takes out a separate Crime policy, which will cover the FGI, as they may not want to add this into their PII policy. This will potentially mean the members having to obtain two separate policies to comply with the ACCA’s regulations. A surprising absence in the updated regulations is the need for members to hold cyber insurance. Cyber crime has increased exponentially and significantly affects professions such as accountants who can hold a large amount of client personal data.

Our customers say...

The cover provided under Professional Indemnity policies can be very limited and, in most cases, will not be adequate should a cyber incident occur. Yes, you will need to bet paypal sports betting sites find out if your insurer will be updating their policy and your cover to ensure that it is compliant with the new requirements. If not, then your broker will need to find compliant cover elsewhere. Professional indemnity cover for the period after a practitioner ceases to practise is becoming harder to find As you are probably aware, ACCA requires that members who cease to practise or are about to retire maintain professional indemnity (PI) cover for a six year 'run-off' period. This cover provides protection should any claims arise from work done before the practice was wound up. This cover is crucial when

13. Tax investigation overlap with PI

For income up to £600,000 the PII limit must be two and a half times the firm’s relevant total income; and with a minimum limit of £100,000. If total fee income is greater than £600,000 then PII limit must be at least £1.5 million (the limits should be applied in local currency equivalents) The largest fee multiplier, of twenty-five times, has been removed from calculation of PII limits Sub-contractors must be included in PII and FGI policies Liabilities covered extended to include sub-contractors Work sub-contracted included in total income Uninsured excess restricted to £20,000 per principal Minimum PII and FGI increased from £50,000 to £100,000 High risk exposures (such as such as cyber related events, tax planning or financial services) covered on an aggregate basis New regulations on Retroactive cover and Regulated work These changes come into effect on 1st September 2023. Members will be given a 4-month period to adjust or obtain cover which is compliant with the new regulations. Renewal on or after 1st January 2024 must comply with the new requirements. Some of the changes implemented will be welcomed by both the insurers, brokers and members, for example the removal of the largest single fee multiplier, which often meant having to hold high limits of indemnity which was not necessarily reflective of the risk associated with the assignment nor the fees received from the work.

13.2 What PI does in a tax enquiry

Another positive change is the increase in the minimum limit of indemnity from £50,000 to £100,000. With the current cost of legal fees, a limit of £50,000 isn’t really enough. High risk exposures are now being allowed on an aggregate basis. This means that more insurers will be comfortable providing cover knowing that their exposure is limited, rather than declining cover all together. For ACCA members it means they will have more options in the market and therefore are not left without cover or having to apply for a waiver from the ACCA which can often be a long drawn -out process. it comes to protecting accountants.

11. Fee-multiple sizing: ICAEW, ACCA and the worked examples

Without comprehensive accounting insurance in place, your business could struggle to survive such claims. Other unexpected circumstances, such as the theft of computer equipment, or a fire or flood at your business premises, could be financially damaging for your business. Accounting business insurance can protect you and make the difference. Most accountancy associations (including the ACCA, AAT, CIMA and ICAS) require members to hold a minimum level of accountants’ professional indemnity insurance to protect you if a client alleges you have made a mistake in your work - such as not filing their accounts on time, making an error in a VAT return or providing poor advice in relation to a self-assessment. Our specialist accountants’ insurance can be tailored to provide cover however you need it, as well as giving you complementary access to a 24-hour legal advice helpline and legal hub for any business-related legal issues.