Professional Indemnity Insurance for Accountants

Third-party fraud and dishonesty refers to theft of the client’s money, as opposed to the accountancy firm's own money, and is usually covered within the main insuring clause (civil liability) of a professional indemnity policy.

Run-off cover — easy to ignore, expensive to forget

ICAEW recommends you take necessary steps to ensure there is no gap in insurance cover which would be a breach of the PII Regulations. Firms have a legal obligation to make a fair presentation of the risk on taking out or renewing cover. Therefore, in order to safeguard the indemnity available for a claim should it arise, it is essential that firms are open and transparent with their insurer/prospective insurer when taking out or renewing cover as to: their claims history and any potential claims (or grounds to suspect a claim - ‘circumstances’); In-depth and complete information should be provided at the outset of the renewal process in an effort to make proposals more attractive to insurers, and to assist in obtaining a timely response from insurers as to whether cover terms will be offered. The duty of fair presentation was introduced by the Insurance Act 2015. The PII Committee recommends that firms prepare early for their renewal and that they take advice from a trusted and reputable broker or other adviser when taking out their insurance.

13.4 The R&D investigation overlap (preview)

The committee recommends firms discuss their placement strategy with their broker to ensure access to a number of different insurers; specifically, firms may wish to clarify whether their brokers are ‘whole of market’ brokers. If firms are unable to obtain a new policy before their current policy expires, they should note that their last insurer is required, under the minimum approved wording, to extend cover for an additional 30 days (see clause D3). There can be a lot to think about when you are deciding to close down a firm, including securing appropriate run-off insurance. Run-off insurance responds to claims for work done while in practice but arising after the practice has ceased. Insurers take a cautious view of insuring firms that advise on or introduce clients to tax mitigation schemes. Fraud claims have increased in both frequency and value in the past few years.

• When hiring subcontractors, ensure they hold their own EL insurance to avoid liability transferring to you.
• For joint ventures, a project-specific insurance package meeting all parties' minimums is often required.
• When working overseas, local statutory insurance minimums must be met, which can differ significantly.
• For mergers and acquisitions, due diligence must verify all target company insurance meets legal minimums.
• Temporary event insurance must meet local authority requirements for public safety and liability.

There are several reasons for this, but the main factor is that online banking makes it so much easier to fraudulently transfer money.

What does AAT require for PI?

Section 8 of the guidance, Professional conduct in relation to taxation, gives advice to firms on how they should deal with tax schemes, including if the only involvement is to make introductions to other firms. ICAEW’s engagement letters helpsheet includes material provided by bet best free odds comparison tool the Tax Faculty for tax practitioners about specialist and ad hoc tax advisory services. T: +44 (0)1908 248 250 E: pii@icaew.com Live Chat Insurance required by the PII regulations must be obtained from a participating insurer. Why it’s time to check your FGI cover Fidelity guarantee insurance (FGI) exists to protect your firm or organisation against theft of the firm’s own money, securities or property by an employee, partner, contractor, or volunteer. FGI can also be known as first-party fraud, theft, employee dishonesty or simply fidelity cover.

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What are the requirements for FGI cover? ACCA’s regulations require that member firms in public practice with more than one member of staff must have at least £100,000 of cover in place for any one claim, to help protect the business and enable it to continue trading following a fraudulent act. In line with the revised ACCA regulations effective from 1 September 2023, your FGI cover must also extend to cover your sub-contractors. FGI has traditionally been covered by a separate section or clause within professional indemnity insurance (PII), with ACCA practising regulations stating that ‘FGI may, but need not, form a single policy with such PII and all such PII and FGI must remain in force for all of the period during which a relevant practising certificate is held’. Importantly, FGI cover should not be confused with third-party fraud and dishonesty cover. Lockton has handled numerous claims for first-party fraud.

What does a professional indemnity insurance policy cover?

We can undertake a confidential review of your current arrangements and work with you to ensure that you have best value and cover available for your business. The regulations relating to audit, insolvency, probate, investment business and the eligibility requirements for a practising certificate (PC) all require members and firms to comply with ICAEW's PII Regulations. The PII Regulations give details of the amount of insurance required, insurers and the policy wording insurers must use. Qualifying insurance is underwritten in terms of the minimum wording, which is approved by ICAEW. Policies must use this wording or contain a difference in conditions endorsement.

Cover Provided by AXA – An ‘A’ Rated Insurer

ICAEW PII minimum approved policy wording – effective from 1 September 2021 Schedule of amendments to the PII minimum approved policy wording (1 September 2021) Non-members can download an order form to obtain historic copies of ICAEW's minimum approved policy wording. You must obtain the insurance required by the PII regulations from a participating insurer. These insurers have agreed to meet the requirements of ICAEW's minimum approved policy wording. The fact that an insurer is on the list does not imply that ICAEW has performed independent checks on the insurer's suitability. ICAEW recommends that you investigate the current ratings and discuss with your brokers the suitability of these insurers when you take out or renew your insurance. In one case, a long-standing member of staff was able to transfer funds from both the accountancy firm’s own bank account and those of its clients directly into the bank accounts of their close relatives.

This took place over a period of eight years and over £600,000 was misappropriated. The member of staff held a trusted position as a bookkeeper within the firm. How are insurers bet paypal gambling sites uk altering their FGI cover? There are several ways in which insurers are altering their cover: A number of insurers will only offer FGI on an aggregate basis. This limits the amount insurers are exposed to in a policy period, as once the aggregate limit is eroded by losses, they will not be required to pay any more. This kind of aggregate cover would not be compliant with ACCA regulations as cover must be on an ‘any-one-claim’ basis. Policy conditions may state that the accountancy firm’s own accounts must be independently certified or audited on an annual basis. Since most firms don’t otherwise need their accounts audited, this has the effect of excluding first- party fraud losses, thereby becoming non-compliant with ACCA’s regulations. It’s becoming more common for insurers that offer FGI to ask for dual authorisation for any financial transactions over a certain amount.

Other types of business insurance for accountants

When obtaining PII or renewing existing cover, you should ensure you arrange qualifying insurance and check the following: The insurer is on the list of the current list of participating insurers (and if the insurance is provided by more than one insurer, that all insurers are participating). The cover meets the minimum limits of indemnity set out in ICAEW’s PII Regulations. The policy provides cover which meets ICAEW’s approved minimum wording and includes at least six years’ retroactive cover (ie, cover for claims arising in relation to advice, services and business activities carried out during the last six years). Please also remember to check that the policy complies with ICAEW's updated requirements that took effect in September 2024. All participating insurers have agreed to provide cover under terms that bet bookies offers new customers match those of ICAEW's approved minimum wording.

The cyber impact on PI policies

Many insurers use their own policy wording and, in some instances, this will include extensions of cover beyond the cover that is required under the minimum wording. Participating insurers which use a different policy wording must also include a difference in conditions (DIC) clause in the policy and, as an extra safeguard, in the absence of an express DIC clause, it will be deemed to apply. In the event of a dispute between a policy holder and their insurer, the difference in conditions clause should ensure that ICAEW's minimum wording overrides any provision in the insurer's wording that is less favourable to the insured. All ICAEW compliant policies should include a DIC clause and there is provision in ICAEW’s contract with each insurer for firms to enforce this requirement. If you require further information about this, please call +44 (0)1908 248 250 or use our Live Chat service. For example, insurers may insist that there are two independent signatures on cheques, or that any electronic transfer of funds is witnessed and documented by another director or employee. If this second authorisation check is not made, any subsequent first-party fraud may not be covered by the policy and insurers may refuse the claim. Often, an insurer will ask on their proposal form or statement of fact whether the annual accounts have been audited and if dual authorisation is in place.

• Public Liability insurance is not a legal minimum but is often required for contracts and leases.
• Professional Indemnity insurance is a legal requirement for certain professions like financial advisors.
• Motor insurance is a legal minimum for any company vehicles, with at least third-party cover.
• Product Liability insurance may be required if you manufacture, supply, or repair goods.
• Directors' and Officers' Liability insurance is not legally required but is critical for risk management.

This acts to alert the firm that these procedures must be in place for FGI cover to apply. Other insurers will simply include these terms within the conditions or exclusions of their policy wording, so this should always be checked to ensure coverage is compliant with ACCA regulations. As fraud becomes increasingly prevalent, many insurers are beginning to leave FGI cover out completely in their accountants' PII policies. To ensure that you have cover that meets the ACCA’s requirements and to adequately protect your firm, we recommend: Check that your policy provides FGI – all insurers construct their policy wordings differently, but generally you can find this under a heading such as ‘Insuring Clause’, ‘Insurance Clause’, ‘Scope of Cover’, ‘What is Covered’ or ‘Extensions of Cover’. The insuring clause should contain language along the lines of: ‘insurers will indemnify the insured for any loss which the insured shall first discover they have sustained by reason of any dishonest or fraudulent act or omission’ Check the policy wording to ensure there are no onerous terms or conditions that must be fulfilled for FGI cover to be valid – these are often found under a separate section of the policy, which may be headed ‘General Conditions’, ‘Policy Conditions’, ‘Special Conditions’, or ‘Conditions Precedent’ It is always worthwhile in checking the ‘Exclusions’ section of the policy to make sure FGI is not excluded.