FSA Handbook - Full Handbook

MIPRU 3.2.1 01/01/2007

A firm must take out and maintain professional indemnity insurance that is at least equal to the requirements of this section from:

(1) an insurance undertaking authorised to transact professional indemnity insurance in the EEA; or

(2) a person of equivalent status in:

(i) a Zone A country; or

(ii) the Channel Islands, Gibraltar, Bermuda or the Isle of Man.

[Note: Article 4(3) of the1 Insurance Mediation Directive1]

MIPRU 3.2.2 06/04/2007

The minimum limits of indemnity for a firm whose Part IV permission covers both insurance mediation activity and 2home finance mediation activity 2is 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.

MIPRU 3.2.3 01/01/2007

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 3.2.4 06/04/2007

The contract of professional indemnity insurance must incorporate terms which make provision for:

(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) the minimum limits of indemnity per year set out in this section;

(3) an excess as set out in this section;

(4) appropriate cover in respect of legal defence costs;

(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 or2 home finance mediation activity2 concerned; and

(6) cover in respect of Ombudsman awards made against the firm.

MIPRU 3.2.5 01/01/2007

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 3.2.6 01/01/2007

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

Minimum limits of indemnity: insurance intermediary

MIPRU 3.2.7 01/03/2009

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

(1) for a single claim, €13,120,200 3; and

(2) in aggregate, €31,680,3003 or, if higher, 10% of annual income up to £30 million.

[Note: Article 4(3) of the1 Insurance Mediation Directive1]

MIPRU 3.2.7A 01/03/2009

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 3.2.8 01/01/2007

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: 2home finance2 intermediary

MIPRU 3.2.9 06/04/2007

If the firm is a 2home finance intermediary,2 then the minimum limit of indemnity is the higher of 10% of annual income up to £1 million, and:

(1) for a single claim, £100,000; or

(2) in aggregate, £500,000.

Excess

MIPRU 3.2.10 01/01/2007

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 3.2.11 01/01/2007

For a firm which does not hold client money or other client assets, the excess must not be more than the higher of:

(1) £2,500; and

(2) 1.5% of annual income.

MIPRU 3.2.12 01/01/2007

For a firm which holds client money or other client assets, the excess must not be more than the higher of:

(1) £5,000; and

(2) 3% of annual income.

Policies covering more than one firm

MIPRU 3.2.13 01/01/2007

If a policy provides cover to more than one firm, then:

(1) the limits of indemnity must be calculated on the combined annual income of all the firms named in the policy; and

(2) each firm named in the policy must have the benefit of the relevant minimum limits of indemnity.

Additional capital

MIPRU 3.2.14 01/01/2007

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 3.2.15 01/01/2007

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

MIPRU 3.2 Professional indemnity insurance requirements