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MIPRU 3.2 Professional indemnity insurance requirements

MIPRU 3.2.1R

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 EEA; 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.

[Note: Article 4(3) of the Insurance Mediation Directive2]

2
MIPRU 3.2.2G

The minimum limits of indemnity for a firm whose Part 4A permission covers both insurance mediation activity and home finance mediation activity 1is 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 mediation activity apply.

1
MIPRU 3.2.3G

A non-EEA firm (such as a captive insurance company outside the EEA) 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

MIPRU 3.2.4R

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 mediation activity or home finance mediation activity1 concerned; and

    1
  6. (6)

    cover in respect of Ombudsman awards made against the firm.

MIPRU 3.2.5G

A firm is responsible for the conduct of all of its employees. The firm's employees include, but are not limited to, its partners, directors, individuals that are self-employed or operating under a contract hire agreement and any other individual that is employed in connection with its business.

MIPRU 3.2.6G

A firm is responsible for the conduct of all of its appointed representatives.

Minimum limits of indemnity: insurance intermediary

MIPRU 3.2.7R

If the firm is an insurance intermediary, then the minimum limits of indemnity are:

  1. (1)

    for a single claim, €1,120,200 3; and

    3
  2. (2)

    in aggregate, €1,680,3003 or, if higher, 10% of annual income up to £30 million.

    3

[Note: Article 4(3) of the Insurance Mediation Directive2]

2
MIPRU 3.2.7AG

3Article 4(7) of the Insurance Mediation Directive requires the limits of indemnity to be reviewed every five years to take into account movements in European consumer prices. These limits will therefore be subject to further adjustments on the basis of index movements advised by the European Commission.

MIPRU 3.2.8R

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.

Minimum limits of indemnity: home finance1 intermediary that is not an MCD credit intermediary4

MIPRU 3.2.9R

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:

11
  1. (1)

    for a single claim, £100,000; or

  2. (2)

    in aggregate, £500,000.

Minimum limits of indemnity: MCD credit intermediaries

MIPRU 3.2.9AR

4If 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 only5; or

  2. (2)

    a home finance intermediary that is:5

    1. (a)

      an MCD mortgage adviser; or

    2. (b)

      an MCD mortgage arranger,5

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

then the minimum limit of indemnity is the amount set out in article 1 of the Commission Delegated Regulation (EU) No 1125/2014 which is reproduced in MIPRU 3.2.9B EU.

[Note: article 29(2) of the MCD]

MIPRU 3.2.9BEU

4The minimum monetary amount of the professional indemnity insurance or comparable guarantee required to be held by credit intermediaries as referred to in the first subparagraph of Article 29(2)(a) of Directive 2014/17/EU shall be:

  1. (1)

    EUR 460 000 for each individual claim;

  2. (2)

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

[Note:article 1 of the Commission Delegated Regulation (EU) No 1125/2014.]

Excess

MIPRU 3.2.10R

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).

MIPRU 3.2.11R

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.

MIPRU 3.2.12R

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.

Policies covering more than one firm

MIPRU 3.2.13R

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.

Additional capital

MIPRU 3.2.14R

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

MIPRU 3.2.15R

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