AAT Members Professional Indemnity Insurance

Claims-made PI responds only if the policy in force when the claim is notified covers the alleged work.

• Insurance requirements can be stipulated in the Articles of Association for limited companies.
• Shareholders' agreements may mandate specific Directors' and Officers' Liability cover levels.
• Bank loans or financing agreements often require asset and key person insurance as collateral.
• Landlord lease agreements frequently require tenants to have Public Liability insurance.

Once you stop trading and stop paying premiums, your last policy is the last policy that will ever respond — unless you buy run-off.

• Minimum cover for Public Liability in many service contracts often starts at £1 million.
• Professional Indemnity minimums for accountants and auditors are often set by their professional institutes.
• Cyber insurance minimums in IT contracts are becoming standardized, often requiring £1-5 million cover.
• Product Liability cover of £2-5 million is a common minimum for manufacturers supplying large retailers.

ICAEW requires that, when a firm ceases to be engaged in public practice, run-off cover meeting the PII Regulations is held for at least two years, and that the firm then takes "all reasonable steps" to maintain compliant cover for a further four years — six years in total. The six-year figure aligns with the ordinary contractual limitation period under English law (twelve years for deeds, which is unusual in accountancy but not unheard of).

What about the excess?

At its core, Professional Indemnity Insurance — usually written as PI or PII — pays the legal costs of defending a civil claim made against your practice by a client or third party who says they have suffered financial loss as a result of professional services you provided, and pays any damages or settlement awarded against you up to the limit of the policy. For an accountancy practice, "professional services" is a broad envelope. It typically covers audit and assurance, accounts preparation, tax compliance and advice, payroll, company secretarial work, management consultancy, corporate finance and transaction support, insolvency advice (where regulated separately), and forensic accounting. Most policies will respond whether the alleged error was a missed deadline, an arithmetic mistake, negligent advice, a failure to spot something a reasonable accountant would have spotted, or a breach of contractual or fiduciary duty. What PI does not cover is also worth knowing up front.

4.3 Excess limits

It does not cover the actual tax owed by your client if you advised them poorly — only the consequential loss they suffered from your negligence, which is a different number. It does not cover regulatory fines or penalties against your practice or your individual members. It does not respond to dishonesty, fraud or criminal conduct by you or your partners — those are excluded as a matter of policy and as a matter of insurance law. And it generally does not respond to disputes about your own fees, which are usually handled outside the policy. Three bodies regulate the great majority of UK accountants in practice, and all three require their practising members to hold PI insurance.

What should I know if I decide to move from my existing PI insurer?

ICAEW sets out its requirements in the Professional Indemnity Insurance Regulations, materially revised with effect from 1 September 2024. ICAEW-regulated firms must hold "qualifying insurance" with a "participating insurer" — an insurer that has contracted with ICAEW to provide cover on the approved minimum wording. ICAEW publishes the current list of participating insurers on its bet new customer offers betting sites website; because the list changes, you should check it (or have your broker check it) at each renewal rather than rely on any fixed roll-call. Under the regulations the minimum limit of indemnity is now £2m for any one claim and in the aggregate. For firms with gross fee income below £800,000, the minimum is two and a half times gross fee income, subject to an absolute minimum of £250,000. ACCA's requirement is more prescriptive still: six years' run-off is mandatory.

How does PI interact with the Money Laundering Regulations?

Firms with gross fee income above £50m are not required to hold qualifying insurance but must have appropriate arrangements in place, which ICAEW monitors. Excess is capped: the maximum permitted aggregate excess must not exceed the higher of £3,000 or 3% of the firm's gross fee income. ACCA members in practice are bound by the ACCA Rulebook, which also requires PI cover scaled by income, but the figures are not the same as ICAEW's. Under ACCA's requirements a firm with total income below £600,000 must hold the greater of 2.5 times its total income or £100,000; a firm with total income of £600,000 or more must hold at least £1.5m. ACCA also mandates six years' run-off cover and, for firms with principals or staff, fidelity guarantee insurance.

Limitation period

A practice holding both ICAEW and ACCA registration needs to meet whichever regulator's bar is higher on each metric. AAT licensed members in practice need PI cover on an "any one claim" basis. AAT's minimum is the greater of 2.5 times gross fee income or a floor that depends on structure — £50,000 for sole traders, £100,000 for partnerships and limited companies — with a maximum required limit of £1m once gross fee income exceeds £400,000. The obligation is real and AAT's monitoring will check it. Beyond your professional body, two further regulators may apply.

ICAEW Compliant Cover

HMRC through the Money Laundering Regulations supervises tax and accountancy services for AML purposes; firms not supervised by ICAEW, ACCA, AAT or a similar body must register with HMRC. The Financial Reporting Council (FRC) regulates statutory audit through the Recognised Supervisory Bodies — ICAEW, ICAS, ACCA and Chartered Accountants Ireland — and through its own oversight of major audits, and statutory auditors have additional PII expectations layered on top. If you operate across England, Scotland and Wales the same broad framework applies; ICAS (the Scottish professional body) operates its own PI requirements for its practising members. Most practices that lose a claim discover they should have been carrying more. The regulator's floor is the minimum a body felt comfortable mandating across an entire profession; the figure that's right for your practice depends on the size of the engagements you take on, the sectors you work in, and the corporate structure your clients sit in. The economic reality is that the limitation period for negligence claims is six years from the date the cause of action arose, with later "long-stop" possibilities for latent damage under the Latent Damage Act 1986.

• 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.

Two years is the mandatory floor under ICAEW's regulations; six is the practical standard and the ACCA mandate; more is sometimes prudent. Run-off is typically priced as a single up-front premium based on a multiple of your last year's working premium (commonly 100% to 250% across the run-off period in aggregate).

• 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.

Selling rather than winding down does not automatically transfer your run-off obligation to the acquirer.

The sale documentation has to deal with it explicitly. We cover the practice-sale considerations in our companion article on practice mergers and sales for architects — the principles for accountants are very similar.

Self-Employed Accountant Insurance

A corporation tax return late, a P11D missed, a confirmation statement filed wrong — usually low-value individually, but they multiply if a number of clients are affected by the same internal failure. Insolvency advice (where the firm gives it). If the practice has insolvency-qualified members, advice that contributes to wrongful trading findings against directors can become an accountant's problem too. Strictly fee disputes are outside PI, but it is common for a client to refuse to pay and then countersue on the underlying work — which immediately puts PI in play. If you wind down your practice, retire, or sell, your liability for work already done does not vanish. Underwriters look at five things before they price your renewal.

Published: Thursday, 8 July 2021

A rough proxy: think about your three largest live engagements. What's the value of the transactions, balance sheets or tax positions you're signing off across those three? Your PI limit should comfortably exceed the worst-case financial exposure on the most exposed one, with headroom for defence costs (which themselves frequently run into six figures on a contested claim). Owner-managed-business practices doing accounts prep and personal tax for SME directors might find £500,000 to £1m bet gambling offers today of cover is sensible. Practices with corporate finance, lead-advisory or insolvency capability typically buy at the £2m mark and upward.

Office Break In and Equipment Loss

Audit firms — particularly those auditing financial services entities, pension schemes or listed companies — buy higher again, sometimes much higher. We deal with this in detail in our companion article on how much PI cover your practice actually needs. The shape of the limit also matters. Most accountancy PI policies are written on a claims-made basis with a per-claim limit and an aggregate cap across the policy year. A £1m "any one claim" policy with an unlimited aggregate covers very differently from a £1m "any one claim, £2m aggregate" policy, which in turn covers very differently from a £1m "in the aggregate" policy where one big claim exhausts your cover for the year.

15.2 The IP Bond — the statutory bond

The popular image of an accountancy PI claim is a complex tax-advice dispute. Working from anonymised industry patterns, the recurring categories include: A client follows advice on, for example, an Entrepreneurs' Relief (now Business Asset Disposal Relief) claim, an EIS scheme, a SDLT planning arrangement, or a pension contribution structure. The client owes the tax plus interest plus penalties and turns on the accountant for the difference between the position they thought they were in and the position they ended up in. These are the high-value claims — settlements in the £200,000-to-£1m range are routine, sometimes much more. Closely related but distinct: the client argues that the accountant should have pointed out a tax-saving opportunity, or warned them about an exposure, and didn't. Knowing what they look at lets you prepare a renewal submission that gets you a sensible quote rather than a reluctant one. What proportion of your fees comes from audit, from tax advice, from accounts preparation, from corporate finance, from MLR-supervised work, from insolvency, from outside-the-UK clients?

PII minimum approved policy wording

These are often harder to defend because the file may not record everything that was discussed. Where a bet bookmakers online free registered auditor signs off accounts that later prove materially misstated, the audit firm is the obvious target. The post-2018 hardening of audit-firm PI premiums followed several high-profile audit failures. As in the opening scenario — the buyer of a business relies on management accounts or due-diligence work that turns out to overstate value. The claim is for the diminution in value, which can easily exceed the transaction fees the accountant earned.