Accountants' Professional Indemnity Insurance: What You Need to Know

In today’s highly regulated environment, Professional Indemnity Insurance (PII) isn’t just a tick box for Accountants—it’s also usually a requirement from their regulatory body. Whether you’re just one person or a larger firm, your regulatory body will have some specific requirements dependent on your Turnover.

Why PII Matters Now More Than Ever

Professional indemnity insurance protects your firm against claims of negligence, errors, or omissions—covering legal fees, compensation, and defence costs. Regulatory bodies across the UK mandate the collection of PII for those in public practice, highlighting its essential role in public trust and professional accountability.

PII claims can stem from anything: a miscalculated tax return, a missed filing deadline, or even the accidental loss of confidential client documents. With rising legal costs, increased scrutiny, and more complex client engagements, many regulators have recently tightened their PII rules to ensure adequate protection for firms and their clients.

With each professional body having slightly different requirements, it can be important to not only get the right cover but also the right insurer, as this is often a stipulation.

PII Requirements by Regulatory Bodies

The ICAEW last updated its requirements on 1^st September 2024. ICAEW mandates Professional Indemnity Insurance for any member who holds a practising certificate and engages in public practice. Recent changes reflect rising claim values and a need for stronger minimum protection.

Key requirements:

• The minimum limit of Indemnity is £2,000,000 for any one claim or in the aggregate.

  
  

• For Small firms with an income of less than £800,000, the minimum level of cover is two and a half times the gross fee income, subject to a minimum cover of £250,000.

  
  

• The Maximum aggregate excess should not exceed £3,000 or 3% of gross fee income (whichever is higher).

• Cover must use ICAEW‑approved minimum wording and be placed with a participating insurer.

• Cover is also required for a minimum of 2 years should the company cease trading for at least 2 years, with reasonable steps to maintain it for up to 6 years.

• The ACCA updated their requirements on 1^st September 2023.

• For income less than £600k, the PI must be greater than 2.5 times your total income, subject to a minimum cover of £100,000.

• For income greater than £600K, a minimum £1.5 million indemnity is required.

• Subcontracted work must be included in income calculations and covered by the PII policy.

• The Excess cannot exceed £20,000.

• Fidelity guarantee insurance (FGI) is also required, with a minimum requirement for cover at £100,000.

• The AAT also has a mandatory requirement for PII Insurance for all licensed members.

• Sole traders need cover equivalent to  2.5× gross fee income or £50,000, whichever is greater

• Partnerships / Limited companies need 2.5× gross fee income or £100,000, whichever is greater

• Firms with income above £400k have a maximum requirement of £1,000,000.

• Full civil liability cover and fully retroactive policies are required.

Given the very different Policy requirements of regulatory bodies, it is important to make sure that when obtaining insurance cover, you ensure that your Insurance Broker knows which regulatory body you are affiliated with and any requirements they have set.  This will ensure that no matter what your requirements are, the broker obtaining the quotations for you will ensure your cover is compliant with your regulatory body.

Professional indemnity insurance is more than a regulatory requirement—it’s a badge of credibility. With regularly changing requirements, firms that stay ahead not only protect themselves but also strengthen their marketability.

The team at Mango Insurance has a deep understanding of the needs of Accountants and has several Policies that comply with your regulatory bodies' needs and have already had very good results for our Accountants, making them considerable savings.