Accountants Insurance | PI Requirements, Costs, Quotes

Are you an accountant in need of professional indemnity (PI) insurance?

• Fines for non-compliance with Employers' Liability insurance are enforced by the Health and Safety Executive (HSE).
• Operating without required motor insurance can lead to vehicle seizure, fines, and penalty points.
• Breaching contractually agreed insurance levels can lead to contract termination and legal claims.
• Operating without mandated Professional Indemnity can result in disciplinary action from your regulatory body.
• Inadequate insurance can lead to personal liability for directors if the company cannot cover claims.

As a practice providing professional services to its clients, you must ensure that you’re protected should anything go wrong.

Having the right accountants’ Professional Indemnity Insurance in place is the answer.

Table of contents

The Regulations require that you provide clients with information about the insurance you have in place including the contact details for the insurer and the territorial coverage of the insurance. You have a choice of four methods by which to make this information available to your client: You provide your clients with such information on your own initiative You make it easily available to your clients at the place where you provide the service by displaying your certificate, or where the contract for the service is concluded You make it easily available to your client electronically (for example, on your website) Make it available in any information document you supply to your client in which you give a detailed description of the service The CILEx Regulation Transparency Rules (Transparency Rules) state that you are required to have Professional Indemnity Insurance (PII) to cover all legal services you provide, and it must be clear which legal services are covered by your PII. As consumers assume all legal service providers are regulated, although they are not, you can emphasise your firms regulated status by emphasising the benefits of professional standards and consumer protections offered by PII and possible access to the CILEX Compensation Arrangements. Full details can be found at the Price and Service Transparency section of our website. Professional service firms grapple yearly with the perennial question of how much professional indemnity insurance is appropriate for their businesses, constantly reassessing the fine balance between premium and risk transfer.

Changes to AML regulations

Obviously, a business’s tolerance for risk is the starting point and every business owner or board of directors will differ in their approach, fundamentally driven by stakeholders. While organisational risk is an accepted by-product of doing business, the key is bet bonus app download in identifying and mitigating threats that might create unwelcome potential exposure, whether financial, legal, or human. Risk and reward: the higher the risk, the greater the uncertainty, but ultimately also the potential for greater gains. This makes sense and many businesses are willing to adopt a high tolerance benchmark. However, things may not always be that simple: regulatory or legal requirements can necessitate a more cautious process.

Limitation period

Accountancy firms in England and Wales are required to comply with regulations in respect of professional indemnity (PI) policies, notably with certain minimum standards of coverage limits, use of participating insurers and particular policy wordings. Additional cover in excess of these limits is a matter of choice. If a business’s risk tolerance is low, what are the considerations for additional PI cover over and above the minimum standards? Any assessment of risk implications for accountants ought to involve a close analysis of a practice’s client base. Two issues are highly relevant and often overlooked in favour of a simple (but perhaps misguided) focus on premium: the nature of client work and the volume of such work. Join ICPA for enhanced, ICAEW-compliant insurance to protect yourself and secure your practice against unforeseen client claims.

4. ACCA Professional Indemnity Insurance Regulations

Once you have agreed a quote, do not put the cover on risk until you have received provisional authorisation. Once you have received provisional authorisation, put your PII on risk and arrange for a copy of the insurance certificate to be sent to us. The links to the left will help you obtain your PII. We recommend that you instruct a broker to help you secure insurance. Our Buyers’ Guide to Professional Indemnity on the left-hand side of this page provides you with further information on instructing a broker.

Professional Body Requirements

Under our Rules, PII cover must be obtained from a qualifying insurer. A qualifying insurer is an insurer that: Is authorised and regulated to conduct insurance business in the UK by the Financial Conduct Authority (FCA) Has a credit rating from AM Best of at least B+ or, Standards & Poor’s rating of at least Category BBB (CILEx Regulation does not undertake any additional steps to regulate, vet or approve qualifying insurers) Has signed the CILEx Qualifying Insurers Agreement We provide a list of qualifying insurers which can be found on the left-hand side of this page The minimum level of cover is £2 million and applies regardless of the actual wording of the policies. The minimum level of cover is contained within the Qualifying Insurers Agreement (QIA). Each of our insurers sign up to the QIA, which requires qualifying insurers to offer a level of cover which should meet the CILEx Minimum Wording (found on the left-hand side of this page) What if £2 million is not enough? The minimum level of cover you are required to take is for £2 million however the total amount of PII you need will depend on the size of your entity and exposure to risk.

13.3 The boundary case — and the gap

You should seek advice from your broker and/or insurer to ensure that you have a sufficient level of cover for your entity. You must not exclude or attempt to exclude liability below the minimum level of cover of £2 million. If you seek to limit your liability to a level above the minimum level of cover, the limitation should be set out in writing and you should bring it to your client’s attention. How do I inform consumers about my PII? There are two specific rules that require our Authorised Entities to inform consumers that they have Professional Indemnity Insurance. check_small Through our membership, ICPA members benefit from insurance provided by AXA.

• UK employers must have Employers' Liability (EL) insurance with a minimum cover of £5 million.
• The EL certificate must be displayed at each business premises where employees work.
• Insurance must be provided by an authorised insurer under the Financial Services and Markets Act 2000.
• Cover is required for all employees, including temporary, casual, and contracted staff.
• Certain businesses, like family businesses with no direct employees, may be exempt.
• Failure to have EL insurance can result in fines of up to £2,500 per day.

We are proud to be working with such a reliable and credible professional liability insurance provider. check_small Members will be pleased to know that AXA is A-rated, demonstrating

• Insurance policies must be reviewed annually to ensure they meet updated legal minimums.
• Notify your insurer immediately if your business activities change to avoid invalidating cover.
• Keep all insurance certificates and policy documents accessible for inspection by authorities.
• Use a broker specializing in your industry to navigate complex minimum requirement landscapes.

their excellent ability to pay out in the case of a claim.

Are tax planning claims covered by PI?

This exposure will vary for all types of businesses but has particular relevance for professional service firms. The setting of PI limits over and above minimum regulatory limits should not be arbitrary nor based on premium alone, but a true reflection of the business’s risk exposure and tolerance, against a background of the professional services undertaken. As well as PI exposure, a number of other factors deserve consideration when assessing business risks, including the possible transfer of risks relating to crime, cyber security and management liability. A full and timely discussion with your broker is recommended. If you have any questions, please contact your Lockton Account Manager for further advice or email accountants@uk.lockton.com. check_small Professional indemnity insurance is vital for any professional services

Other insurance for accountants

As from 1 January 2021, Lloyd’s markets are now requiring that PI policies either positively affirm or categorically exclude cyber cover from PI policies, by way of endorsement. The intention is that cover for cyber-related issues should be clear and categorical - no longer silent. Non-Lloyd’s markets are also reviewing their positions. This has implications on PI coverage limits. Whether cover for cyber-related incidents is affirmed or excluded, an analysis of the effect of the endorsement will be critical.

Is professional indemnity insurance mandatory for chartered accountants?

An exclusion of cyber cover may mean more cover is available for other PI claims (although potentially leaving an uninsured exposure that needs to be considered). By contrast, an endorsement of affirmative cover within the PI policy may mean that a cyber-related claim could erode PI limits. This possibility might necessitate an increase in PI limits, particularly when considering the exponential rise in ransomware attacks: attacks increasingly involving the exfiltration and release of confidential information into the public domain. A key exposure for any accountancy business is the sensitive data held on its clients. When considering limits, estimates around the cost of losing data and dealing with ensuing liability claims is imperative. business - but different types of businesses have different needs.

Liability Cover Options

If an accountancy practice typically provides advice to SMEs, the risk exposure might sit at a fairly measured and tolerable level. However, if, for example, the business engages in audit work for billion pound entities (or even one such entity), the risk exposure will be markedly different. Should the practice find itself on the receiving end of a negligence claim in such circumstances, the potential financial exposure is clearly considerably greater. A failure to consider this presupposes an underinsured business. Secondary to the nature of the work, an analysis of the volume of work will be critical - or, perhaps more correctly, the volume of work in any given sector.

Trading without professional indemnity insurance

Over-exposure to a particular market segment may create multiple claim scenarios when market forces conspire. Consider accountancy firms which provided niche auditing services to financial institutions during the 2007 global financial crisis. Post the GFC, auditing firms found themselves under investigation for their roles in failing to detect fraudulent wrongdoing. It is not difficult to see how an aggregation of possible claims across a number of similar clients would have a profound impact on a firm’s professional liability insurance. On a less ‘global’ scale, an accountancy firm acting for a property developer may provide professional services to a number of related entities.

When a Tax Error Becomes a Claim

In the event of the developer suffering financial hardship, it is not inconceivable that a raft of corporate insolvencies might follow, creating pressure points and, not atypically, finger-pointing at professional advisers. Again, the combined possible exposure ought not to be underestimated. A topical consideration is the impact of ‘silent cyber’. Historically, many businesses have been able to rely on their bet free bets uk existing customers PI policy for third party liability cover in the event of a cyber incident. Such cover was typically not expressly worded, but ‘silent’.