Professional indemnity explained

Run-off cover for financial advisers closing a firm

Reviewed by the Apex broking team · Last reviewed 2026-10-31

Run-off cover is professional indemnity insurance bought when an advice firm stops trading, so that claims about its past advice can still be met. It matters because complaints about advice can reach the Financial Ombudsman Service many years after the client meeting.

Part of: Professional indemnity insurance

In short

When an advice firm retires, sells or closes, its annual PI policy normally ends, but its liability for past advice does not. Because PI is usually written on a claims-made basis, a complaint made after the policy lapses is commonly uninsured unless run-off cover is in place. Ombudsman time limits run six years from the advice or three years from when the client knew, or should have known, they had cause to complain, with no 15-year longstop. Run-off cover, or a buyer taking on the liabilities, is how most firms deal with that tail.

Do financial advisers need run-off cover when they close?

In most cases, yes, if the firm wants protection for complaints about advice it has already given. A professional indemnity policy for advisers is usually written on a claims-made basis: it responds to claims first made and notified while the policy is live, not to advice given while it was live. When the annual policy ends and is not renewed, a later complaint about advice from 2019 or 2023 will commonly find no policy to respond.

The FCA's PII rules for personal investment firms sit in IPRU-INV 13, and the FCA's guidance on professional indemnity insurance says firms should hold cover for past business as well as current business. Those rules bite while a firm is authorised. Once permissions are cancelled, the question of how to fund old complaints becomes a commercial decision, and run-off cover is the usual answer. Our general guide to run-off cover explains the mechanics across professions.

Why the Ombudsman's time limits drive the length of cover

For advisers, the length of the tail is set mainly by the Financial Ombudsman Service rules in DISP 2.8, summarised on our FOS time limits page and on the Ombudsman's time limits guidance for businesses.

Rule	What it means for a closed firm
Six years from the event	A client can usually complain within six years of the advice or the problem.
Three years from awareness	If later, a client can complain within three years of when they knew, or ought reasonably to have known, they had cause to complain.
No 15-year longstop	The Ombudsman confirms the 15-year longstop that applies to many negligence claims in the courts does not apply to its complaints.
Six months after final response	The client has six months from the firm's final response to refer the complaint.
Exceptional circumstances or consent	Late complaints can be heard in exceptional circumstances, or if the firm consents.

The practical effect is that pension transfers, drawdown and long-term investment advice can generate complaints decades later. The government has said it will legislate for an absolute 10-year limit, with limited exceptions to be set by the FCA and focused on longer-term products such as pensions, but that is not yet law; our page on FOS reform and the 10-year limit covers what is known.

Retirement, sale, consolidators and the FSCS

How you deal with the tail depends on how the firm ends.

Retirement or closure. The firm, or its directors arranging things before dissolution, buys run-off cover for a period of years. Availability and terms vary with the claims record and the advice mix, particularly defined benefit transfer business.
Share sale. The company, with its liabilities, passes to the buyer. The buyer's PI may pick up past advice if the retroactive date allows, but sellers should check the sale agreement, warranties and indemnities.
Asset or client bank sale to a consolidator. The buyer usually takes the clients, not the old company. The selling entity commonly keeps liability for past advice and needs its own run-off.
Leaving a network. Appointed representatives are covered by the principal's PI, and the FCA expects principals' cover to extend to former ARs where its rules require it. Check how the network handles complaints about your past advice; see leaving an IFA network.

If a firm has failed and cannot pay, eligible clients may turn to the FSCS. For firms that failed after 1 April 2019, the FSCS investment protection limit is up to £85,000 per eligible person, per firm. That compensation is funded by levies on other firms, which is one reason regulators look closely at firms that close leaving complaints unfunded.

Illustrative examples

These examples are illustrative only and do not describe real firms or claims.

Example 1: retirement without run-off

A sole director closes a small advice company and lets the PI policy lapse. Four years later a former client complains about drawdown advice. With no live policy, the company has no insurer to handle the complaint and the director has to deal with it alone, possibly while the company is being wound up.

Example 2: client bank sale

A firm sells its client bank to a consolidator and keeps the old company for a short period. It buys a run-off policy before cancelling permissions. A later suitability complaint about a 2021 recommendation is notified to the run-off insurer, which handles it subject to the policy terms and excess.

Example 3: known circumstance not notified

Before closing, a firm knows that a client has queried a transfer value but does not notify the circumstance to its expiring insurer. The run-off insurer later relies on a known circumstances exclusion. The matter could have been protected by notifying it before the annual policy ended.

Common mistakes

Assuming the last policy covers everything before it. Under claims-made cover, it usually does not respond to claims made after it ends.
Not notifying circumstances before expiry. Tidy up open complaints, queries and file review findings and notify circumstances to the current insurer first.
Cancelling permissions first and asking about run-off later. Terms are commonly easier to obtain while the firm is still trading and its records are current.
Forgetting the excess and limit. Run-off is often a single aggregate limit for the whole period, and each claim still carries an excess that someone has to fund.
Relying on a sale agreement without checking insurance. An indemnity from a buyer is only as good as the buyer's finances and PI.

What to check with your broker

The advice mix over the last six years and beyond: pensions, transfers, investments, protection and mortgages.
Open complaints, Ombudsman referrals and known circumstances, notified before the annual policy ends.
Whether the run-off period is fixed, can be extended, and is paid up front.
The limit of indemnity, whether it is aggregate, and whether defence costs sit inside the limit.
Exclusions for specific product types, past reviews or regulatory redress schemes.
Who is insured: the company, directors, former advisers and former ARs.
How the sale agreement, warranties and any buyer indemnity sit alongside the policy.

Our pages on run-off cover costs and PI insurance for IFAs give more background. Apex arranges PI and run-off cover for advice firms; a broker reads every enquiry.

Sources

Frequently asked

How long should run-off cover last for a financial adviser?

There is no single answer. The Ombudsman's time limits run six years from the advice or three years from awareness, with no 15-year longstop, so advisers with pension or transfer business often look at longer periods. Insurers commonly offer set periods, and availability depends on claims history and advice mix.

Does the FSCS pay if my closed firm has no PI?

If the firm has failed and cannot meet a valid claim, eligible clients may be able to claim from the FSCS, up to £85,000 per person per firm for investment claims against firms failing after 1 April 2019. That does not help the directors with defence costs or reputational issues, and it is funded by other firms.

Is run-off cover required by the FCA?

The FCA's PII rules for personal investment firms apply while a firm is authorised and expect cover for past business. After permissions are cancelled, run-off is generally a commercial decision. Many closing firms buy it because complaints can still reach the Ombudsman years later.

If I sell to a consolidator, do I still need run-off?

Often yes, if the sale is of the client bank or assets rather than the company. The old entity usually keeps liability for past advice. In a share sale the buyer takes the company, but check the sale terms and whether the buyer's PI covers advice given before completion.

Can I notify complaints to my old policy after it ends?

Usually not. Claims-made policies generally respond only to claims and circumstances notified during the policy period, or any short extended reporting period it allows. That is why notifying known issues before expiry, and arranging run-off, matters.

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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, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.