The Changing Requirements for Accountants’ PI Insurance

This year will see regulatory changes impacting on the professional indemnity (PI) insurance policies taken out by accountancy firms across the UK.

The holding of PI is required by the two main regulatory bodies overseeing the profession— the Institute of Chartered Accountants (ICA) and the Association of Chartered Certified Accountants (ACCA).

Why Do Accountants Need PI Cover?

There are numerous reasons for the change in regulation, but the main two driving it are the high inflation being seen across the economy, along with a rise in the cost of PI claims against accountants. According to the UK’s Office for National Statistics, the Consumer Price Index rose steadily from 0.7% in February 2021 to 9.6% in October 2022, before finally beginning to taper down. Yet even with this tapering, inflation has remained stubbornly high, being above 5% for most of 2023.

And when economies are under pressure, there is a resultant rise in PI claims made. It has been no secret that the economy has been strained in the last few years. Last year, the law firm Kennedys predicted a rise in PI claims across the whole of the economy, citing the financial state of the UK, the impact of geopolitics including the war against Ukraine, Brexit, Covid-19, and climate change.

And when times are tight and people and business are looking to tighten their belts, any mistakes—perceived or definite—from accountants are likely to draw further ire and legal action. It is a subject already raised last year by another law firm, Browne Jacobson, in a piece on City AM.

What Are the Changes?

The ACCA changed its rules last September, doubling the minimum PI limit for firms with fees under £600K to £100,000 or 2.5 times income. Larger firms with income of £600K or more, on the other hand, now have to have a minimum PI limit of £1.5m. Another move undertaken by the ACCA was the requirement for Fidelity Guarantee cover limits to increase from £50,000 to £100,000, and for the requirement for these to cover subcontractors.

Meanwhile, the ICA’s changes are set to take hold in September this year. That organisation has decreed that firms with fees over £800,000 now require an increased limit of £2m, up from £1.5m. Those with fees below £800,000 must have a limit of 2.5 times the firm’s gross fee income with a minimum limit of £250,000, up from £100,000. The ICA has also said that Policy Excess must not exceed the higher of £3k or 3% of the firm’s gross fee income, a shift from the current rule of no more than £30,000 multiplied by the number of principals.

What Accountants Liability Insurance is Out There?

At Aqueous, we have responded by making changes to our products that reflect these moves. We now have a tailored Fidelity Guarantee endorsement for ACCA-regulated firms to deal with this new requirement. Those firms that declare themselves as ACCA regulated on our portal will automatically be given this cover. It’s a unique offering that we’re very proud of.

Our portal is also able to consider accountancy firms that have fees up to £1m. Alongside this, we can consider open market primary risks for firms with fees of up to £5m, and excess layers for those with fees of up to £10m. We also offer limits of up to £15m.

Our Chief Underwriting Officer here at Aqueous is Mark Ford, who has been with the company for over eight years, has seen, firsthand, the pressure put on firms by the recent and incoming changes over liability insurance. He says:

“We appreciate the recent changes in the market and the demands this puts on the accountancy firms, as such we’ve worked hard to enhance our product to offer robust cover in a way that meets the real demands they face as a business. In this time when accountants are seeing their costs increase due to new coverage requirements, Aqueous are here to offer tailored cover at a speed of services they can rely on.”

– Mark Ford, Chief Underwriting Officer, Aqueous Underwriting

The incoming regulations will mean some firms will incur higher costs as they purchase bigger limits, but they should not be a burden. Having the best PI insurance for accountants is a good method to avoid future headaches.

The products we supply here at Aqueous are among the best professional indemnity products for accountants. Our primary insurers are on the ICA list of participating insurers, with the ability to cover to firms with incomes of up to £5m for open market primary risks. We can also consider excess layers up to £10m income.

All of this can be done on our portal for smaller firms (up to £1m income) or through the open market. One of our defining characteristics here is that we can provide you with a quote on our portal in fewer than five minutes, with the Fidelity Guarantee cover automatically included for ACCA firms if the broker trades via our Eportal. And through the open market, we can provide quotes in less than a day.

There is no good reason to hesitate. Changes have already been made, and more are on the way. The best, most stress-free time to act is NOW.