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)
an insurance undertaking authorised to transact professional indemnity insurance in the UK7; or
-
(2)
a person of equivalent status in:
- (i)
a Zone A country; or
- (ii)
the Channel Islands, Gibraltar, Bermuda or the Isle of Man.
- (i)
The minimum limits of indemnity for a firm whose Part 4A permission covers both insurance distribution activity6 and home finance mediation activity1is the higher of the limits of indemnity for these activities. If the firm opts for a single comparable guarantee to finance the claims which might arise as a result of both activities, the requirements for insurance distribution activity6 apply.
1A non-UK firm7 (such as a captive insurance company outside the UK7) will be able to provide professional indemnity insurance only if it is authorised to do so in one of the specified countries or territories.. The purpose of this provision is to balance the level of protection required for the policyholder against a reasonable level of flexibility for the firm.
Terms to be incorporated in the insurance
The contract of professional indemnity insurance must incorporate terms which make provision for:
-
(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)
the minimum limits of indemnity per year set out in this section;
-
(3)
an excess as set out in this section;
-
(4)
appropriate cover in respect of legal defence costs;
-
(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 activity6 or home finance mediation activity1 concerned; and
1 - (6)
A firm is responsible for the conduct of all of its appointed representatives.
Minimum limits of indemnity: insurance intermediary
If the firm is an insurance intermediary, then the minimum limits of indemnity per year6
are:
Minimum limits of indemnity: home finance1 intermediary that is not an MCD credit intermediary4
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 1Minimum limits of indemnity: MCD credit intermediaries
- (1)
an MCD article 3(1)(b) credit intermediary who is not also an MCD article 3(1)(b) creditor carrying out direct sales only5; or
- (2)
a home finance intermediary that is:5
- (a)
an MCD mortgage adviser; or
- (b)
who is not also an MCD mortgage lender carrying out direct sales only;
- (a)
then the minimum limit of indemnity is that specified in MIPRU 3.2.9BR8.
7[Note: article 29(2) of the MCD]
Excess
For a firm which does not hold client money or other client assets, the excess must not be more than the higher of:
-
(1)
£2,500; and
-
(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:
Policies covering more than one firm
If a policy provides cover to more than one firm, then:
-
(1)
the limits of indemnity must be calculated on the combined annual income of all the firms named in the policy; and
-
(2)
each firm named in the policy must have the benefit of the relevant minimum limits of indemnity.
Additional capital
If a firm seeks to have an excess which is higher than the relevant limit, it must hold additional capital as calculated in accordance with the appropriate table below:
Table: Calculation of additional capital for firm not holding client money or other client assets (£000's)
Income |
Excess obtained up to and including: |
|||||||||||||
More than |
Up to |
2.5 |
5 |
10 |
15 |
20 |
25 |
30 |
40 |
50 |
75 |
100 |
150 |
200+ |
0 |
100 |
0 |
5 |
9 |
12 |
14 |
17 |
19 |
23 |
26 |
33 |
39 |
50 |
59 |
100 |
200 |
0 |
7 |
12 |
16 |
19 |
22 |
25 |
30 |
34 |
43 |
51 |
64 |
75 |
200 |
300 |
0 |
7 |
12 |
16 |
20 |
24 |
27 |
32 |
37 |
47 |
56 |
71 |
84 |
300 |
400 |
0 |
0 |
12 |
16 |
21 |
24 |
28 |
34 |
39 |
50 |
60 |
77 |
91 |
400 |
500 |
0 |
0 |
11 |
16 |
21 |
24 |
28 |
34 |
40 |
53 |
63 |
81 |
96 |
500 |
600 |
0 |
0 |
10 |
16 |
20 |
24 |
28 |
35 |
41 |
54 |
65 |
84 |
100 |
600 |
700 |
0 |
0 |
0 |
15 |
20 |
24 |
28 |
35 |
41 |
55 |
67 |
87 |
104 |
700 |
800 |
0 |
0 |
0 |
14 |
19 |
24 |
28 |
35 |
42 |
56 |
68 |
89 |
107 |
800 |
900 |
0 |
0 |
0 |
13 |
18 |
23 |
27 |
35 |
42 |
56 |
69 |
91 |
109 |
900 |
1,000 |
0 |
0 |
0 |
0 |
17 |
22 |
27 |
34 |
41 |
57 |
70 |
92 |
111 |
1,000 |
1,500 |
0 |
0 |
0 |
0 |
0 |
21 |
26 |
34 |
41 |
57 |
71 |
97 |
118 |
1,500 |
2,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
30 |
38 |
56 |
71 |
98 |
121 |
2,000 |
2,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
24 |
33 |
53 |
69 |
99 |
126 |
2,500 |
3,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
28 |
50 |
68 |
101 |
130 |
3,000 |
3,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
47 |
67 |
101 |
132 |
3,500 |
4,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
43 |
65 |
101 |
133 |
4,000 |
4,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
39 |
62 |
101 |
134 |
4,500 |
5,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
58 |
99 |
134 |
5,000 |
6,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
54 |
97 |
133 |
6,000 |
7,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
91 |
131 |
7,000 |
8,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
84 |
126 |
8,000 |
9,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
75 |
120 |
9,000 |
10,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
113 |
10,000 |
100,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
100,000 |
n/a |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Table: Calculation of additional capital for firm holding client money or other client assets (£000's)
Income |
Excess obtained up to and including: |
||||||||||||
More than |
Up to |
5 |
10 |
15 |
20 |
25 |
30 |
40 |
50 |
75 |
100 |
150 |
200+ |
0 |
100 |
0 |
4 |
7 |
9 |
12 |
14 |
18 |
21 |
28 |
34 |
45 |
54 |
100 |
200 |
0 |
7 |
11 |
14 |
17 |
20 |
25 |
29 |
38 |
46 |
59 |
70 |
200 |
300 |
0 |
7 |
11 |
14 |
17 |
20 |
25 |
30 |
40 |
49 |
64 |
77 |
300 |
400 |
0 |
0 |
9 |
13 |
16 |
19 |
25 |
30 |
40 |
50 |
67 |
81 |
400 |
500 |
0 |
0 |
0 |
11 |
14 |
18 |
24 |
29 |
40 |
51 |
68 |
83 |
500 |
600 |
0 |
0 |
0 |
8 |
12 |
15 |
22 |
28 |
40 |
51 |
69 |
85 |
600 |
700 |
0 |
0 |
0 |
0 |
9 |
13 |
20 |
26 |
39 |
50 |
69 |
86 |
700 |
800 |
0 |
0 |
0 |
0 |
6 |
10 |
17 |
24 |
38 |
49 |
69 |
87 |
800 |
900 |
0 |
0 |
0 |
0 |
0 |
7 |
15 |
22 |
36 |
48 |
69 |
87 |
900 |
1,000 |
0 |
0 |
0 |
0 |
0 |
0 |
12 |
19 |
34 |
47 |
68 |
87 |
1,000 |
1,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
16 |
32 |
45 |
67 |
86 |
1,500 |
2,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
18 |
34 |
59 |
81 |
2,000 |
2,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
19 |
48 |
71 |
2,500 |
3,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
6 |
37 |
64 |
3,000 |
3,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
26 |
55 |
3,500 |
4,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
14 |
45 |
4,000 |
4,500 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
1 |
33 |
4,500 |
5,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
21 |
5,000 |
6,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
8 |
6,000 |
7,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
7,000 |
8,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
8,000 |
9,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
9,000 |
10,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
10,000 |
100,000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
100,000 |
n/a |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
The rule on the items which are eligible to contribute to the capital resources of a firm applies (see MIPRU 4.4.2 R.