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Hot Topic Highlight - Changes to RICS Minimum PII Requirements (May 2020)



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What is this week's blog about?


In this week’s blog, we look at the latest changes to RICS’ minimum Professional Indemnity Insurance (PII) policy wording from 1 May 2020. Essential reading for all RICS APC and AssocRICS candidates, together with MRICS and FRICS chartered surveyors.


Why do firms need PII?


Rule 9 of the Rules of Conduct for Firms states that ‘a firm shall ensure that all previous and current professional work is covered by adequate and appropriate indemnity cover that meets standards approved by the Standards and Regulation Board.’

There are three main purposes of holding PII:

  • The firm is protected from financial loss if it faces a claim that cannot be met from it’s own financial resources

  • The firm’s clients are protected from financial loss that a firm cannot meet

  • The firm or insured member is protected against the ‘consequences of its liability to pay damages to third parties for breaches of professional duty that it commits through its professional activities’


When did the changes apply from?


1 May 2020 in the UK.


Why were the changes made?


To ensure that PII cover remains appropriate in ‘unprecedented market conditions’, i.e. it continues to be available and affordable to the industry.


Furthermore, the changes made to run-off cover aim is to ensure that all firms have access to run-off cover, providing better protection to consumers.


Where can I download the full document?


You can download the full document here.


What are the key changes?

  • RICS launched the External Wall Fire Review (EWS) process (EWS1 form) in December 2019 in response to the Grenfell tower fire and valuation of high-rise properties that use actual or potential combustible materials in external wall systems and balconies. Given the potential liability associated with this process, RICS have inserted a temporary ability for insurers to apply their own fire safety exclusions into policies. Previously, RICS included prescribed fire safety exclusions wording in the minimum policy requirements.

  • The excess applicable in respect of defence costs has been adjusted to allow insurance providers more flexibility when proposing renewal term.

  • Unlimited aggregate round the clock limit of liability, with the aim to provide increased availability of PII insurance to firms.


What has changed in relation to run-off cover?


RICS have incorporated earlier changes effective from 1 April 2019 relating to run-off cover.


Run-off cover is required when a firm or member ceases to trade. This must be on a claims-made basis and fully retroactive, so it covers all historic work carried out by the firm.


The new requirements still require firms to have ‘adequate and appropriate’ cover for 6 years in relation to commercial claims.


However, for consumer claims firms must obtain cover for a minimum of 6 years with an aggregate limit of £1m. This should be automatically included in the insurer's minimum wording without any premium paid to trigger it. Firms should obtain longer periods or higher levels of cover if it is ‘adequate and appropriate’ to do.


RICS have also extended the Assigned Risks Pool to include a Run-Off Pool, so firms that cannot reasonably procure run-off cover for commercial claims on the open market have an additional option to secure cover.


How can we help?



Stay tuned for our next blog post to help build a better you


N.b. Nothing in this article constitutes legal, professional or financial advice.