PI insurance for a new solicitors firm — the day-one questions

Setting up a solicitors firm runs two clocks at once — the SRA authorisation clock and the PI-placement clock. Both need to align before the firm can open. This page covers what a founding partner should understand about professional indemnity cover from day one.

The SRA authorisation and PI-placement sequence

A new solicitors firm cannot practise until the Solicitors Regulation Authority has authorised the entity, and the SRA will not confirm authorisation without evidence of qualifying PI cover in place at the point the firm opens.

The relevant rule is Rule 9 of the SRA Code of Conduct for Firms (SRA Standards and Regulations 2019), which requires every authorised body to hold PI cover meeting the SRA Minimum Terms and Conditions. The mySRA application typically asks for the firm name, trading address, nominated compliance officers (COLP and COFA) and details of the intended PII placement.

In practice this means the founding partner speaks to a broker early — often before the mySRA application is finalised — because the insurer will want to see a proposal covering intended fee income mix, work types, partner CVs and any prior claims. A quote agreed in principle gives the founder a confirmed inception date to cite on the application.

Minimum Terms and Conditions from day one

The SRA Minimum Terms and Conditions of Professional Indemnity Insurance (the MTC) set the floor for what a solicitors firm's PI policy must include. A policy sold to an SRA-authorised firm cannot deliver less than the MTC — it can add cover above the floor but it cannot restrict below it.

The minimum limit is £2 million each and every claim for a recognised body such as a sole practice or general partnership, and £3 million each and every claim for a limited liability partnership or a limited company. Both limits sit on an each-and-every-claim basis rather than in the aggregate, a distinctive feature of the solicitors market.

Defence costs sit in addition to the limit for most causes. The MTC also caps the insured's excess so that it cannot apply to defence costs, and it prohibits certain exclusions that appear in other professions' PI wordings — for example insolvency of the firm cannot be used to defeat a claimant's recovery.

The retroactive date question — bringing work from a previous firm

Solicitors who found a new firm rarely start from a blank slate. Most bring client relationships, live matters or completed work across from a prior employer. That creates the retroactive date question — how far back the new firm's cover reaches, and who insures the work done before that date.

Two SRA concepts apply. A "prior practice" is a firm that ceased and whose liabilities and goodwill transferred to another firm. A "successor practice" is the firm that took them over. Where the new firm is a successor practice under the SRA definition, its MTC-compliant policy is required to pick up the run-off liability of the prior practice — the cover follows the work. Where it is not a successor practice, the prior firm carries the tail through its own run-off cover.

The classification turns on facts — client transfers, work-in-progress transfers, staff transfers, name similarity and the intention of the parties. Confirm the prior firm's position in writing before binding cover.

First-year premium considerations

Pricing a new solicitors firm is a rating exercise built on projections rather than history. Insurers ask for anticipated fee income by work type — conveyancing, litigation, commercial, private client, immigration, wills and probate — because rating factors vary sharply across those disciplines. Conveyancing and mortgage-related work typically attract the highest loadings; non-contentious commercial and wills work tends to price lower. Law firms wanting the wording negotiated rather than accepted as offered can read about an FCA-authorised broker placing solicitors PI.

Firm structure matters too. A limited liability partnership carries the £3 million MTC minimum rather than the £2 million partnership floor, which raises the base premium before any rating factors are applied. Number of principals, partner experience, prior claims history and the intended geographic reach all feed into the price.

New firms without a claims history often see minimum premiums applied, meaning the price does not scale linearly with fee income at the lower end. Year-one premiums are rarely a clean guide to mature-year pricing.

The 1 October renewal cycle and mid-year foundations

The solicitors PI market historically renews on 1 October each year, a common renewal date rooted in the closure of the Solicitors Indemnity Fund in 2000 and the transition to the open-market model. That date remains the reference point around which qualifying insurers plan capacity and price policies.

A firm founded in the middle of the year therefore starts life on a short-period policy that runs from inception to the following 1 October, unless the firm actively negotiates something different. A June founder buys roughly four months of cover in the first policy period; a February founder buys roughly eight. The premium is pro-rated but not always cleanly — some insurers apply a minimum-period charge on very short first periods.

Some firms choose to bind an 18-month policy at inception to reach the 1 October cycle with a full trading year already served. Others accept the short period and revisit at first renewal on the strength of actual trading data.

Qualifying insurers and choosing a market

Only insurers signed up to the SRA's Participating Insurers' Agreement (the PIA) can write MTC-compliant cover for solicitors. The SRA publishes the qualifying insurer list annually ahead of the 1 October renewal cycle, and the composition of that list has changed over the past decade as some insurers have exited and others have entered.

The list typically includes a mix of composite insurers, Lloyd's syndicates writing through coverholders and specialist MGAs backed by qualifying capacity. Each carries a different appetite — some target smaller firms, some prefer larger practices, some specialise in high-volume conveyancing. A broker with regular access to a range of qualifying insurers can canvas the market rather than approach a single carrier.

Choice of insurer matters beyond price. Claims handling reputation and long-term commitment to the sector feed into the value assessment. The SRA also operates the Compensation Fund as a client backstop where an authorised firm fails, but that fund sits behind, not instead of, an insurer.

Common pitfalls and red flags

Frequently asked questions

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