FCA authorised · FRN 724952 0117 325 0027Quote & buy →
Professional indemnity explained
Run-off cover for brokers is professional indemnity insurance that stays in force after an insurance or mortgage broking firm stops trading, so claims about past work can still be met. It matters because complaints and negligence claims about old policies and mortgages can surface years after the firm has closed.
Part of: Professional indemnity insurance
In short
Insurance and mortgage brokers must hold PI that meets MIPRU 3 while they are authorised. When the firm retires, sells its book or closes, the annual claims-made policy normally ends, but liability for past broking does not. Complaints can reach the Financial Ombudsman Service within six years of the event or three years from awareness. Run-off cover, or a buyer taking the company and its liabilities, is how most brokers deal with the tail. Notify known issues before the annual policy ends.
Usually, if they want protection for claims about past work. Broker PI is generally written on a claims-made and reported basis. Once it lapses, a later claim, for example that a commercial client was underinsured or a borrower was given unsuitable mortgage advice, will commonly find no policy to respond.
The FCA's PII guidance points firms carrying on insurance distribution, home finance mediation and certain mortgage credit intermediation to the PII requirements in MIPRU 3. Our pages on MIPRU PI for insurance brokers and PI rules for mortgage brokers cover the detail. Those rules apply while the firm is authorised; after cancellation, run-off is usually a commercial decision. Our general guide to run-off cover explains how it works across professions.
| Route | Typical timing | Notes |
|---|---|---|
| Ombudsman complaint | Six years from the event, or three years from awareness if later | No 15-year longstop, per the Ombudsman's guidance. |
| Court claim in negligence | Usually six years from the damage, with later knowledge rules | A 15-year longstop under section 14B of the Limitation Act 1980 applies to many negligence claims. |
| Commercial client claims | Often surface when a large loss is declined | Underinsurance and non-disclosure disputes may arise years after placement. |
Mortgage advice tends to produce complaints when rates change or affordability bites. Insurance broking claims tend to follow a declined or reduced claim, which can happen long after the policy was placed. Our run-off guide for financial advisers covers the same Ombudsman rules from an advice perspective.
| Type of broking | Typical late claim | Usual trigger |
|---|---|---|
| Commercial lines | Underinsurance, missing cover such as business interruption, or a disclosure failure leading to a declined claim | A major loss, often years after placement |
| Personal lines | Wrong cover level or exclusions not explained | A declined home or motor claim |
| Protection | Non-disclosure on an application or unsuitable policy type | A claim on death, illness or incapacity |
| Mortgages | Unaffordable or unsuitable product, or poor advice on fees or term | Payment difficulty, rate changes or remortgage review |
| Equity release and later life lending | Suitability of the product or alternatives not considered | Family review after the borrower's death or move into care |
The common thread is that the trigger is outside the broker's control. A protection policy placed in 2020 may not be tested until a claim in 2030. That is why the business mix over many years, not just the last renewal, shapes the run-off period insurers will offer and how they price it. Our page on broker errors and omissions claims gives further examples.
If a broker has failed and cannot pay, eligible clients may claim from the FSCS, which covers insurance broking and mortgage advice subject to its own limits and rules. That protects clients, not the directors, and is funded by other firms.
These examples are illustrative only.
A small commercial broker sells its renewal rights and keeps the company dormant. Two years later a former client's warehouse fire claim is reduced for underinsurance and the client alleges the broker never advised on sums insured. The dormant company's run-off policy responds, subject to the excess and terms.
A sole trader mortgage adviser retires without run-off. Three years later a client complains to the Ombudsman about a remortgage recommendation. The adviser deals with the complaint personally and has to fund any redress and costs.
A mortgage AR leaves a network and becomes directly authorised. A former client complains about a recommendation made while the adviser was an AR. The complaint is about the network's regulated activity, so it is usually handled under the network's arrangements, but the adviser should confirm this in writing and check whether their new policy's retroactive date overlaps.
Our pages on run-off costs and PI for insurance brokers give more background. Apex arranges run-off cover for insurance and mortgage brokers; a broker reads every enquiry.
It is commonly advisable. Mortgage advice complaints can reach the Ombudsman within six years of the advice or three years from awareness, and a claims-made policy that has lapsed usually will not respond. Run-off cover keeps protection in place for past advice, subject to its terms.
MIPRU 3 sets PII requirements for firms while they are authorised to carry on insurance distribution or home finance mediation. After permissions are cancelled, run-off is generally a commercial decision rather than a rule requirement, but many firms buy it because claims can still arise.
It depends on the deal. In a share sale the buyer takes the company and may extend its PI to past work through the retroactive date. In a book or asset sale, the seller usually keeps the liability. Check the sale agreement and the buyer's policy wording.
The principal is responsible for its ARs' regulated activities, and the FCA says principals' PI should cover current and former ARs where the rules require it. In practice, check how the network will handle complaints about past work and whether the AR needs its own run-off.
Tell us what your business does, your turnover and any claims. A broker reads every enquiry and comes back with options. No fee for a quote. Or call 0117 325 0027.
Get a PI quote Request a callbackApex 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.
