All law firms authorised by the Solicitors Regulation Authority (SRA) must hold professional indemnity insurance (PII) that meets the SRA Minimum Terms and Conditions (MTCs). The requirement applies to recognised bodies (traditional law firms), recognised sole practices, and licensed bodies (alternative business structures). Operating without qualifying insurance is a breach of the SRA Indemnity Insurance Rules and can result in the SRA intervening in the firm's practice.
The SRA Indemnity Insurance Rules are made under section 37 of the Solicitors Act 1974, which empowers the Law Society (delegated to the SRA) to make rules concerning indemnity against loss arising from claims in respect of any description of civil liability incurred by a solicitor or former solicitor.
Minimum cover levels
The minimum level of cover depends on the type of authorised body:
- Relevant recognised bodies and relevant licensed bodies
(broadly, firms that are limited companies or LLPs) — minimum
£3,000,000 for any one claim
- All other cases (sole practitioners and traditional
unincorporated partnerships) — minimum
£2,000,000 for any one claim
These are minimum amounts per claim, not aggregate limits. The MTCs require that cover must not be subject to an aggregate limit below which insurers are not liable. Firms may choose higher levels of cover based on their risk profile and the nature of work undertaken. Conveyancing, commercial property, and high-value corporate transactions typically require substantially higher cover.
Scope of cover
The MTCs require PII policies to cover all civil liability incurred in connection with the firm's practice, including:
- Claims for breach of duty (whether in contract, tort, or otherwise)
- Claims arising from negligence, errors, or omissions
- Defence costs (in addition to the indemnity limit, not eroding it)
- Liability of current and former principals, employees, and consultants
- Liability arising from dishonesty or fraud by any person (subject to the
innocent principal rule, which protects innocent partners from exclusion)
- Claims first made during the policy period, regardless of when the act
or omission occurred (claims-made basis)
Self-insured excess
Firms may agree a voluntary excess (also called a deductible) with their insurer. However, the MTCs require the insurer to pay the full claim first and then recover the excess from the firm. This protects the claimant, who receives full compensation regardless of whether the firm can pay the excess.
Indemnity period
There is no fixed industry-wide renewal date: the common indemnity period ending 30 September was abolished from October 2013. Policies may incept and renew on any date, although 1 October remains a common market convention. The obligation is to maintain continuous qualifying cover with no gap. The SRA monitors compliance with the Indemnity Insurance Rules.
Extended policy period
If a firm has not obtained replacement qualifying insurance when its policy expires, the policy extends automatically for a 30-day extended policy period. During this period, the firm may practise normally while seeking cover. If the firm is still uninsured at the end of that period, a 60-day cessation period follows. During this period, the firm may only work on existing instructions. If no cover is obtained by the end of the 90 days, the firm must cease practice. Firms must notify the SRA within five business days of entering the extended policy period or cessation period.
Run-off cover
When a firm closes or its authorisation is revoked, the firm's last insurer must provide run-off cover for 6 years from the date of closure. This ensures that claims arising from work done while the firm was practising can still be met. Run-off cover must be on the same minimum terms and conditions as the original policy. The cost of run-off cover is typically included in the premium structure agreed with the insurer.
Participating insurers
PII must be placed with a participating insurer (formerly known as a 'qualifying insurer'). To participate, the insurer must:
- Be authorised under Part 4A of the Financial Services and Markets
Act 2000 to carry on insurance business, or carry on insurance market
activity at Lloyd's (section 316(3))
- Have entered into the SRA Participating Insurers Agreement, committing
to provide cover on the MTCs
The former Assigned Risks Pool ended on 30 September 2013 and was replaced by the extended policy period and cessation period mechanism. The SRA publishes and maintains a list of participating insurers on its website. Firms must check that their insurer appears on this list.
SRA Compensation Fund
The SRA Compensation Fund is a safety net of last resort where a person has suffered loss due to the dishonesty of a solicitor or employee of a firm, or the failure of a firm to account for money. The Fund does not replace PII. It covers situations where insurance does not respond (typically dishonesty by the insured). Grants from the Fund are discretionary, not a right, and are subject to a maximum payment cap. All authorised firms must contribute to the Fund through an annual levy.
- Minimum cover (sole practitioners and unincorporated partnerships)
- £2,000,000 per claim
- Minimum cover (limited companies and LLPs)
- £3,000,000 per claim
- Aggregate limit
- No aggregate limit permitted below which insurers are not liable
- Defence costs
- Payable in addition to the indemnity limit (non-eroding)
- Indemnity period
- No fixed common renewal date (abolished from October 2013) - 1 October remains a common market convention
- Run-off cover duration
- 6 years from date of firm closure
- Run-off cover provider
- Last insurer on risk must provide run-off on MTC terms
- Self-insured excess
- Insurer must pay full claim first, then recover excess from firm
- Policy basis
- Claims-made (covers claims first made during policy period)
- Consequence of non-insurance
- SRA intervention in the firm's practice
- Statutory basis
- Solicitors Act 1974, section 37
- Regulatory framework
- SRA Indemnity Insurance Rules (part of SRA Standards and Regulations, effective 25 November 2019)