MIPRU 3.2 Professional indemnity insurance requirements

A firm must take out and maintain professional indemnity insurance that is at least equal to the requirements of this section from:

1. (1)

   an insurance undertaking authorised to transact professional indemnity insurance in the UK; or

2. (2)

   a person of equivalent status in:

   1. (i)

      a Zone A country; or

   2. (ii)

      the Channel Islands, Gibraltar, Bermuda or the Isle of Man.

The contract of professional indemnity insurance must incorporate terms which make provision for:

1. (1)

   cover in respect of claims for which a firm may be liable as a result of the conduct of itself, its employees and its appointed representatives (acting within the scope of their appointment);

2. (2)

   the minimum limits of indemnity per year set out in this section;

3. (3)

   an excess as set out in this section;

4. (4)

   appropriate cover in respect of legal defence costs;

5. (5)

   continuous cover in respect of claims arising from work carried out from the date on which the firm was given Part 4A permission for the insurance distribution activity or home finance mediation activity concerned; and

6. (6)

   cover in respect of Ombudsman awards made against the firm.

If the firm is an insurance intermediary, then the minimum limits of indemnity per year

are:

1. (1)

   for a single claim, €1,300,380; and

2. (2)

   in aggregate, the higher of:

   1. (a)

      €1,924,560; and

   2. (b)

      an amount equivalent to 10% of annual income (this amount being subject to a maximum of £30 million).

If a policy is denominated in any currency other than euros, a firm must take reasonable steps to ensure that the limits of indemnity are, when the policy is effected and at renewal, at least equivalent to those required.

If the firm is a home finance intermediary that is not subject to MIPRU 3.2.9A R, then the minimum limit of indemnity is the higher of 10% of annual income up to £1 million, and:

1. (1)

   for a single claim, £100,000; or

2. (2)

   in aggregate, £500,000.

If the firm is:

1. (1)

   an MCD article 3(1)(b) credit intermediary who is not also an MCD article 3(1)(b) creditor carrying out direct sales only; or

2. (2)

   a home finance intermediary that is:

   1. (a)

      an MCD mortgage adviser; or

   2. (b)

      an MCD mortgage arranger,

   who is not also an MCD mortgage lender carrying out direct sales only;

then the minimum limit of indemnity is that specified in MIPRU 3.2.9BR.

The minimum monetary amount of the professional indemnity insurance or comparable guarantee is:

1. (1)

   EUR 460 000 for each individual claim;

2. (2)

   in aggregate EUR 750 000 per calendar year for all claims.

In this chapter, "client assets" includes a document only if it has value, or is capable of having value, in itself (such as a bearer instrument).

For a firm which does not hold client money or other client assets, the excess must not be more than the higher of:

1. (1)

   £2,500; and

2. (2)

   1.5% of annual income.

For a firm which holds client money or other client assets, the excess must not be more than the higher of:

1. (1)

   £5,000; and

2. (2)

   3% of annual income.

If a policy provides cover to more than one firm, then:

1. (1)

   the limits of indemnity must be calculated on the combined annual income of all the firms named in the policy; and

2. (2)

   each firm named in the policy must have the benefit of the relevant minimum limits of indemnity.

The rule on the items which are eligible to contribute to the capital resources of a firm applies (see MIPRU 4.4.2 R.