2This chapter applies to a firm with Part IV permission to carry on any of the activities:

1. (1)

   insurance mediation activity;

2. (2)

   home finance mediation activity;1unless any of the following exemptions apply:

   1
3. (3)

   in relation to insurance mediation activity, this chapter does not apply to a firm if another authorised person which has net tangible assets of more than £10 million provides a comparable guarantee; for this purpose:

   1. (a)

      if the firm is a member of a group in which there is an authorised person with net tangible assets of more than £10 million, the comparable guarantee must be from that person;

   2. (b)

      A 'comparable guarantee' means a written agreement on terms at least equal to those in a contract of professional indemnity insurance (see MIPRU 3.2.4 R) to finance the claims that might arise as a result of a breach by the firm of its duties under the regulatory system or civil law.

4. (4)

   in relation to home finance mediation activity,1 this chapter does not apply to a firm if:

   1
   1. (a)

      it has net tangible assets of more than £1 million; or

   2. (b)

      the comparable guarantee provisions of (3) apply (as if the firm was carrying on insurance mediation activity) but substituting £1 million for £10 million in (3)(a) and (b);

5. (5)

   This chapter does not apply to:

   1. (a)

      an insurer; or

   2. (b)

      a managing agent; or

   3. (c)

      a firm to which IPRU(INV) 13.1.4(1)(Financial resource requirements for personal investment firms: requirement to hold professional indemnity insurance) applies; or3

      3
   4. (d)

      an exempt CAD firm to which IPRU(INV) 9.2.5R (Initial capital and professional indemnity insurance requirements - exempt CAD firms that are also IMD insurance intermediaries) applies.3

6. (6)

   in relation to home finance mediation activity,1 this chapter does not apply to an authorised professional firm:

   1
   1. (a)

      that is required by another rule to hold professional indemnity insurance (see IPRU(INV) 2.3.1R); and

   2. (b)

      whosehome finance mediation activity,1 is incidental to its main business.

      1

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.

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 IV 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.

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

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,1 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.

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.