Aipedia: Insolvency practitioners

Insolvency bond vs PI: who pays for AI errors

Aipedia, by the Apex broking team · Last reviewed 2026-10-27

The statutory bond secures an IP's proper performance in each appointment, while PI protects the IP against negligence claims, and AI errors can engage either or both. A lapse in PI may also invalidate the bond.

Part of: AI in Insolvency practitioners

In short

Insolvency practitioners need both a statutory bond for each appointment (s.390(3) IA 1986; Sch 2 IP Regs 2005) and PI required by their RPB. The bond protects the estate, with a specific penalty sum of at least the value of assets between £5,000 and £5m plus a £750,000 general sum. PI protects the IP against negligence claims. Neither mentions AI. The IPA warns a PI lapse may invalidate the bond, and R3 found practitioners unsure whether PI covers AI errors.

Two protections, two purposes

Every insolvency practitioner carries two different kinds of protection, and they are often confused.

The statutory bond. Section 390(3) of the Insolvency Act 1986 requires security to be in force for each appointment "for the proper performance of his functions". The detail is in Schedule 2 to the Insolvency Practitioners Regulations 2005. It protects the estate and those interested in it, not the IP.

Professional indemnity insurance. PI is required by the RPBs, not by the Act, and protects the IP and firm against claims for breach of professional duty. The IPA PII guidance, effective 1 January 2024, says its PII Regulations "make PII compulsory for Individual Members".

How they compare

	Statutory bond	PI insurance
Source	s.390(3) IA 1986; Sch 2 IP Regs 2005	RPB rules (IPA PII Regulations; ICAEW PII Regulations)
Protects	The estate, against failure in the proper performance of functions	The IP and firm, against claims for professional negligence or breach of duty
Amount	Specific penalty sum at least the value of the insolvent's assets, minimum £5,000, maximum £5,000,000, plus a general penalty sum of a further £750,000	IPA: minimum limit set by its PII Regulations; maximum excess £20,000 per principal. ICAEW: minimum £2m, or 2.5 times fee income with a £250,000 floor below £800,000
Timing	Claims period of at least two years after release	Usually claims-made: the policy in force when the claim is made responds
Link	IPA: failure to maintain PII "may also invalidate your Insolvency Bond"

The bond figures are from Sch 2 paras 3(2)(b), 4, 6, 7 and 8ZA. ICAEW's figures are from its PII Regulations (regs 3.2 and 3.3), effective 1 September 2024.

Where AI errors land

Neither the bond nor the RPB PI rules mention AI. What matters is the type of loss, not whether a tool was involved.

Estate losses in an appointment. If an AI-assisted process leads to a wrong dividend, a missed recovery or an undervalue sale, those with an interest in the estate may look to the bond, and a negligence claim against the IP may follow. A bond provider that pays out may seek recovery from the IP, which can bring PI into play. See proofs of debt and asset realisations.
Advice outside an appointment. Pre-appointment advice is not the performance of functions in an appointment, so a claim about it is generally a PI matter.
Data breaches. Leaks through an AI tool are often primarily a cyber risk; see debtor and creditor data in AI tools.
Regulatory investigations. RPB proceedings are neither a bond claim nor a damages claim; some PI wordings cover defence costs.

Practitioner uncertainty about AI cover

R3's August 2026 report found that "some practitioners are unsure whether their PI policies would cover errors arising from AI use", and that some clients require confirmation that AI is not used in certain processes. It calls for the profession, regulators and insurers to discuss how AI risk is assessed and priced. No RPB or insurer statement on AI and IP PI had been published as at October 2026.

In general, a civil liability PI wording usually responds to a negligence claim whether the mistake was made by a person or with a tool, subject to the terms. The questions to check are whether the wording has any technology, data or AI exclusion, how the proposal form asked about automation, and whether the policy covers claims by directors and debtors as well as creditors. See AI exclusions and clauses.

Practical controls

Keep PI continuously in force: a lapse may invalidate the bond as well as leave you uninsured.
Describe AI and automation use accurately at renewal.
Remember that bond claims can arrive up to two years or more after release, so keep files and, on retirement, consider run-off cover.
Apply R321.1 to every AI-assisted output, so you can show proper performance; see the Code explainer.
Notify circumstances promptly under the claims-made PI policy.

How Apex helps

Apex arranges PI for insolvency practitioners, and a broker can review how your policy sits alongside your bond and treats AI-assisted work. See insolvency practitioner PI cover, our PI guide for IPs and the insolvency practitioners hub.

Sources

Frequently asked

Is the insolvency bond a form of PI insurance?

No. The bond is statutory security for the proper performance of the IP's functions in each appointment and protects the estate. PI is a separate requirement of the RPBs that protects the IP and firm against professional negligence claims.

Can a lapse in PI affect my bond?

Yes. The IPA's PII guidance warns that failure to obtain and maintain PII cover may also invalidate your insolvency bond, so the two need to be kept in force together.

Will my PI cover a mistake made by an AI tool?

Often, a civil liability wording responds to a negligence claim whether or not a tool was involved, subject to the terms and excess. R3 found some practitioners unsure, so check for technology or data exclusions and confirm with your broker.

How long can bond claims be made?

Schedule 2 to the Insolvency Practitioners Regulations 2005 requires a claims period of at least two years after the IP's release. Claims can therefore arise well after the case has closed.

Check your PI covers how you use AI

Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.