What Happens If You're Refused Business Insurance

A declinature is not the end of the placement — but it is the start of a regulatory disclosure obligation that follows the firm for years.

For an FCA-regulated firm, a professional services partnership, or any business that holds compulsory insurance, being refused cover by an insurer triggers consequences well beyond the immediate need to find an alternative market. Every future proposal form will ask the question. Most regulators require the firm to declare it. Specialist brokers can usually find a route to cover, but the route is shorter and cheaper when the firm understands what the declinature actually means, why it happened, and how to present it. This guide explains the practical and regulatory consequences of a declinature and the broker route forward.

What this means in practice

A declinature is a formal refusal by an insurer to offer terms following submission of a complete proposal. It is distinct from a “no quote” position (where the insurer simply does not engage), a withdrawal of terms after initial indication, or a non-renewal (where the existing insurer chooses not to renew on the same basis). Each has different downstream consequences but the declinature is the most serious for disclosure purposes.

Insurers decline for a defined set of reasons:

• Claims history: frequency, severity, or pattern of claims that the insurer cannot price within its target loss ratio.
• Sector hardening: a class of business the insurer has exited or where it has narrowed its appetite. PI for residential conveyancing firms with high transaction volumes has gone through this cycle repeatedly.
• Disclosure issues: a previous breach of the duty of fair presentation, or a current proposal that flags inconsistencies with prior years’ filings.
• Risk management concerns: cyber controls, financial crime processes, regulatory action against the firm or its principals.
• Capacity allocation: the insurer’s available capacity for the class is exhausted for the policy year.

For the firm, a declinature has three immediate practical implications. First, the firm must keep looking — usually with more underwriting friction than the first attempt. Second, the declinature itself becomes a material circumstance under Insurance Act 2015 section 3 that must be disclosed to every subsequent insurer, every renewal, for as long as the question is asked on the proposal form (which is usually indefinitely). Third, for FCA-regulated firms, the declinature is captured on the standard FCA proposal form and must be declared accurately on every renewal.

How the cover usually responds

There is no “cover” for declinature itself — but there are structured routes to placing cover after one. The path varies by profession and by why the declinature happened.

For SRA-regulated solicitors, the position has historically been managed by the Assigned Risks Pool and its predecessor arrangements. The Assigned Risks Pool no longer operates in its original form, having been wound down and replaced by run-off-only arrangements through the Solicitors Indemnity Fund Limited (SIFL). The current SRA position requires firms to place qualifying insurance with a participating insurer or cease practice; there is no mandatory placement of last resort for live trading firms. Firms unable to obtain qualifying insurance face an orderly closure under SRA supervision with run-off cover purchased from the last expired insurer.

For most other regulated professions — ICAEW, RICS, ARB — there is no equivalent of an assigned risks pool. The firm and its broker must find a participating or appropriate market. Specialist brokers (Apex among them) maintain relationships with markets that write what generalist brokers cannot place: insolvency-exposed firms, firms with claims history, firms in sectors that have hardened, firms with cyber incidents on the register.

For non-regulated commercial covers (PL, EL, contents, BI), declinature can usually be resolved through Lloyd’s syndicates or specialist UK insurers that write difficult risks. The BIBA Find-a-Broker scheme is the public-facing route for businesses unable to find cover through their existing broker. BIBA’s scheme connects the firm with member brokers who specialise in the relevant class.

The duty of fair presentation under Insurance Act 2015 section 3 is the legal spine that runs through any placement after declinature. The firm must disclose the declinature and the reasons for it as material circumstances. Failure to do so gives the new insurer remedies under section 8 ranging from avoidance (for deliberate or reckless non-disclosure) to proportionate remedies (for innocent or negligent non-disclosure). The new insurer is far more likely to write terms if the declinature is presented openly and with context than if it is discovered later.

Common mistakes

• Treating a declinature as a private setback. It is a disclosable circumstance and must be declared at every future renewal.
• Submitting the same proposal form to multiple insurers in parallel without disclosing that the first has declined. The second insurer’s offer can be unwound under section 8 if the declinature is not disclosed.
• Allowing the broker to “shop the risk” without a coordinated narrative. The market is small and insurers compare notes; a poorly presented risk gathers declinatures.
• Failing to address the underlying cause. If the declinature was for claims history, an unreformed claims process will not produce a different result at the next renewal.
• Letting the existing policy expire while looking for alternative cover. A gap in cover is a worse problem than a difficult renewal.
• Treating the BIBA Find-a-Broker scheme as a last resort rather than a structured route to specialists.

Worked example

A hypothetical eight-partner accountancy firm in the Midlands, fee income £3.5m, with material insolvency officeholder work and three notified claims in the last six years. At renewal, the incumbent insurer non-renews. The broker approaches three further markets; two decline and one offers terms at three times the previous premium with a £100,000 excess.

The firm engages a specialist PI broker. The specialist:

• Rebuilds the proposal form with full claims narrative, root-cause analysis, and remediation steps for each notified matter.
• Splits the insolvency exposure into a separately quantified line and addresses it in the underwriting submission.
• Approaches markets that specifically write insolvency-exposed PI rather than generalist accountancy markets.
• Discloses the prior declinatures and the reasons given by the declining insurers.

Three weeks later, terms are secured at a premium 1.8 times the original, with a £40,000 excess on insolvency work and £25,000 on other work. The firm holds qualifying cover. The proposal form for the next three renewals will declare both the declinatures and the placement steps taken to resolve them, but the firm is insurable and the trajectory is established.

The point: the declinature was not the problem. The presentation was. Once the presentation was rebuilt, the market responded.

What to do at renewal

If your firm has been declined or is at risk of declinature, the sequencing of the response matters.

1. Obtain the reason for declinature in writing. Insurers are obliged to provide a reason where the firm is FCA-regulated and a declinature has implications for regulatory disclosure.
2. Address the underlying cause. If claims history is the reason, document the root cause and remediation; if disclosure is the reason, audit your last three proposal forms.
3. Move quickly. Most policies have a renewal date and no automatic continuation; cover lapses on expiry.
4. Engage a specialist broker if your current broker cannot place the risk. Generalist brokers have a defined panel; specialists work with markets that do not appear on it.
5. Rebuild the proposal form as a positive underwriting submission, not a defensive one. Underwriters respond to firms that understand their own risk.
6. Disclose the declinature on every subsequent proposal. Treat the disclosure as a section 3 material circumstance.
7. Plan a two-year programme to demonstrate sustained risk improvement. The market remembers but it also forgets, and a stable two-year period with no claims and tighter processes resets the conversation.

Apex’s view

Apex’s view: A declinature is almost always survivable and almost never the end of the placement. The firms that do badly after a declinature are the ones that try to look indistinguishable from a clean risk on the next proposal. The firms that do well are the ones that present the declinature openly, with a narrative and a remediation plan. Underwriters write risks they understand. They decline risks they do not. The job of a specialist broker after a declinature is to give the next underwriter something they can write.

See also

• PI insurance for solicitors: the buyer’s guide
• Selling or merging a professional practice: the PI angle
• Commercial insurance overview for professional firms
• Material circumstance and the duty of fair presentation
• Professional indemnity insurance

Sources

1. Insurance Act 2015, sections 3, 7, 8, and 14
2. Solicitors Regulation Authority Indemnity Insurance Rules
3. Financial Services and Markets Act 2000
4. FCA Handbook, MIPRU 3.2 and ICOBS
5. British Insurance Brokers’ Association Find-a-Broker scheme rules