Following the Retail Distribution Review and the associated Discussion Paper DP 07/04 – ‘Review of the Prudential Rules for Personal Investment Firms’ - PYV and the PFS have got together to seek an option for an extension in Professional Indemnity (PI) cover to go towards the FSA’s goal of providing greater consumer protection for clients of IFA firms that cease to trade.

Currently, once an IFA ceases to be regulated, they are not required to continue carrying PI Insurance. As PI is arranged on a ‘claims made basis’, this means that once the cover has expired, there is no further cover available for any new circumstances which were not reported whilst the policy was live (subject to no extended reporting period being available), unless fresh run-off cover has been arranged. This leaves clients, the FSCS and IFAs (including their personal estate and spouses in cases of sole traders and most partnerships) exposed to the costs of previous negligence et al without any insurance cover.

PYV believe that many IFAs do not purchase run-off cover as they are uncertain of the costs involved and whether it will be available when they require it. Generally, there is not much of a market for run-off cover and insurers are only prepared to offer this on an annual basis to existing Policyholders. Click here to see details of the fruits of the joint PYV/PFS initiative and the offering that some insurers are now prepared to provide, which is designed to give loyal clients the possibility of set rates based on their last annual premium (as a going-concern) for a period of run-off cover for up to three years, subject to satisfactory underwriting criteria. This gives prudent IFAs the chance to consider their requirements now rather than scrabbling around at the time they cease to trade.

Please note that this offer to extend cover is only available from certain insurers and you will need to take advice from specialist PI broker PYV to be able to research the options available to you.

For further information contact Neil Pointon at PYV on the number below or at 10 St Mary at Hill, London, EC3R 8EE.