SIFA 8.3 Professional Indemnity Insurance (PII)

Your firm must hold PII. The requirements are outlined in IPRU(INV) 13.1.3(1)G to 13.1.4(4)G. These are minimum requirements and we expect senior management to take responsibility for ensuring that the cover they have in place is appropriate to the needs of their firm. The PII requirements also apply to networks and firms with 26 or more advisers but this is not discussed further in the Guide.

The terms that your policy must contain are in IPRU(INV) 13.1.4(2)R and include the limits of indemnity that apply. Further core requirements are outlined in IPRU(INV) 13.1.4(5)E to 13.1.4(7)G.

Your firm has the option of using its own financial resources in conjunction with its PII cover. Under IPRU(INV) 13.1.4(8)R to 13.1.4(14)G the policy must not be subject to conditions or exclusions which unreasonably limit the cover provided. However, under IPRU(INV) 13.1.4(10)E a firm is allowed a higher level of excess on a policy where it can show that it has additional own funds which are held in a readily realisable form.

For firms that do a mixture of activities IPRU(INV) 13 applies rather than the requirements in PRU provided the mixture of activities includes personal investment business.

IPRU(INV) 13.1.4(15)R allows firms, whether connected or not, to benefit from a PII policy that provides cover to more than one firm. So your firm may benefit from reduced administration costs from this type of arrangement but you must consider how you will deal with notifications to both your insurer and the FSA.

There is further information about buying PII on the 'Doing business with the FSA' part of our website under 'Information for small firms'.