How a Substantial PI Programme Is Actually Designed

Once a firm’s indemnity requirement grows beyond what a single insurer will comfortably write, the programme stops being a purchase and becomes a piece of design. The decisions multiply: where the primary layer sits, how the tower above it is built, how the layers interact when a claim arrives, and what happens to the past when an insurer changes. Most of these decisions are invisible in the premium invoice, and all of them are visible in a large claim. This page walks through them qualitatively — no pricing, because every risk is different and figures without context mislead.

The primary layer: the foundation everything sits on

The primary layer is where claims are actually handled. Its insurer sets the wording that usually flows up the tower, appoints and manages defence, and takes the first pound of every loss. Choosing the primary is therefore less about price than about three questions: is the wording right for your profession and contract book; is the claims operation one you would want running a career-threatening dispute; and is the insurer committed to your sector for the long term, so continuity is realistic? A strong tower on a weak primary is a well-decorated house on poor foundations.

Excess layers and the tower

Above the primary sit one or more excess layers, each attaching where the layer below exhausts. As a purely illustrative structure — not a recommendation — a firm might carry a primary £5m with excess layers above it taking the programme to its total limit; another might build the same total limit from different-sized slices. The design questions are the same at any scale: how many layers; which insurers on which layer; and whether each excess wording genuinely follows the primary’s terms or quietly introduces its own conditions. “Follow form” deserves reading, not assuming: a single non-concurrent clause in a mid-tower layer can leave a gap that only appears when a claim passes through it.

Any one claim, aggregate, and how the layers aggregate together

At each level of the tower, the limit is written either on an any-one-claim basis — the full limit available for each separate claim — or in the aggregate, one pool for the whole policy year. The distinction matters most in the year you least want it to: a year with two or more significant claims. A programme can also mix the bases, with one basis on the primary and another above, and the interaction is where careful reading pays. If an aggregate excess layer has been eroded by an earlier claim, a later claim may find the tower shorter than the firm believed. Mapping how the whole structure responds to a multi-claim year — not just a single large loss — is one of the most useful exercises a review can perform.

Reinstatements

Some layers can be reinstated after exhaustion, restoring the limit for further claims in the same year; others cannot. Whether reinstatements exist, on which layers, on what conditions and at whose option is a genuine design variable, and it changes the arithmetic of how much protection a stated limit really represents across a bad year. Firms are often surprised to learn which parts of their tower are one-shot.

Retroactive continuity when insurers change

PI is written on a claims-made basis: the policy that responds is the one in force when the claim arrives, not when the work was done. That makes the retroactive position the most dangerous place in the programme to make a mistake. When an insurer changes — on the primary or on any layer — the incoming policy must pick up the firm’s past work without interruption: no new retroactive date, no gap between the old policy’s expiry and the new one’s inception, and known circumstances notified to the outgoing insurer before the switch. Handled properly, insurer changes are routine. Handled casually, they can orphan years of past work, and the problem only surfaces when a claim from that period lands.

Sizing the limit: contract book, not habit

Many firms carry the limit they carried last year because they carried it the year before. A better discipline is to size the programme against the current contract book: the indemnity levels your client agreements actually require, the value and concentration of live engagements, the jurisdictions involved, and the realistic severity of the worst engagement going wrong — including defence costs, which in professional disputes can rival the damages. Sometimes that exercise supports buying more; sometimes it shows a tower taller than any obligation or plausible exposure requires. Either finding is worth having, and only the contract book can tell you which.

Presentation to market: the premium driver you control

You cannot control the insurance cycle. You can control how your firm is presented to it. Underwriters price uncertainty, and a presentation that removes uncertainty — a clear account of what the firm does and refuses to do, risk management and supervision described concretely, claims history explained with the lessons drawn, engagement terms and liability caps evidenced — is consistently the difference between a defensive quote and a considered one. On a layered programme the effect compounds, because every insurer in the tower reads the same submission. Of all the levers in programme design, presentation is the one most fully in the firm’s own hands, and the one most often left to a hurried proposal form.

Frequently asked questions

Why not just buy one big policy from one insurer?

Above a certain size, single-insurer appetite runs out — and even where one insurer would write the whole line, concentration has costs: less competitive tension, dependence on one claims operation, and a harder exit if that insurer’s appetite changes. Layering spreads those risks and lets each insurer sit where it is most comfortable. Where the crossover falls depends on the profession and the market at the time; every risk is different.

Do all the layers renew at the same time?

Usually the tower is aligned to a common renewal date, because misaligned layers create windows where parts of the programme are on different terms. Alignment is a design choice, though, not an automatic fact — and after mid-year changes it is worth confirming the tower still renews as one.

How often should the structure itself be reviewed?

The structure deserves a fundamental look whenever the firm changes shape — a merger, a new service line, materially larger engagements, new jurisdictions — and periodically even without such a trigger, because markets and wordings move. An annual renewal rolls the programme forward; it does not automatically re-examine the design.

If you are weighing any of this up, the easiest next step is a director’s second opinion on your programme — a structured review of what you buy, how it is layered and how it is presented to insurers, with no obligation attached. Or simply call us on 0117 325 0027 and speak to a director.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). Every risk is different: nothing on this page is advice on your own programme, and outcomes depend on your firm’s circumstances and the market at the time.