Practice M&A PII · Seller
Run-off PI cover when selling or closing a practice — the seller's playbook
Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Published 14 July 2026
A professional practice that sells or closes must maintain PI cover for prior acts done during trading. This is run-off cover. It is not optional for most regulated professions, its cost can be material, and how it is structured affects the seller's personal exposure long after cessation.
Why run-off matters after sale or closure
PI insurance is written on a claims-made basis. A claim made after policy expiry is not covered unless a run-off extension is in place. A firm that stops trading with no run-off leaves acts done during trading uncovered against future claims.
Because professional negligence has a long tail — six years under the Limitation Act for contract, six years plus discoverability for tort, longer for building-safety and latent-defect matters — the practical exposure can stretch decades.
Regulator-specific run-off minimums
- SRA (solicitors) — six years mandatory run-off, SRA MTC-compliant terms, from a Qualifying Insurer. Extended Policy Period and Cessation Period rules govern the transition.
- ARB (architects) — ARB Standard 8 requires PII adequate to the tail; no fixed period, but BSA 2022 s.135 makes 15-30 year cover advisable for higher-risk-building work.
- ICAEW (accountants) — two years mandatory run-off under ICAEW Bye-law 61 for cessation; longer if claims are pending.
- RICS (surveyors) — RICS Rules of Conduct Rule 9 requires PII adequate to the tail; typical six years plus.
- FCA-authorised firms — PII adequate to the ongoing tail under MIPRU / ICOBS.
Sizing the cover limit
- Regulator minimums as the floor.
- Turnover-based scaling — some professions apply revenue-linked minimums (ICAEW 2.5x formula).
- Nature of past work — higher-risk sectors need higher limits.
- Claims and notifications history — existing exposure sets the floor for meaningful cover.
- Aggregation position — per-claim vs aggregate structure of run-off.
How run-off is typically structured
- One-off single premium for the whole run-off period (SRA six years, ICAEW two years, ARB negotiated).
- Annual renewable run-off, restarted each year until decision to close.
- Portfolio-basis run-off where multiple partners retire — individual run-off vs firm-level.
- Extended coverage for specific long-tail risks — BSA 2022 for architects, DB-transfer for IFAs.
Cost reality: run-off is expensive. A six-year SRA solicitors' run-off typically costs 2.5x-3.5x the last annual premium, paid as a single premium at cessation. That figure is often the largest single cost in closing a small firm.
Funding the run-off
- Firm funds run-off from working capital before cessation.
- Portion of sale proceeds ring-fenced in the SPA for run-off.
- Individual partners share the run-off cost pro-rata.
- Buyer takes on run-off obligation as part of asset purchase — check the successor-practice implications.
- Where the firm cannot fund run-off, regulatory consequences follow — and the individual professionals may face personal exposure for future claims.
Selling firm vs closing firm — different structures
- Sale to another firm — typically the buyer takes on prior-acts responsibility or seller carries run-off; SPA governs.
- Sale to a management-buyout team — often structured with buyer's PII covering prior acts; seller may still hold personal run-off.
- Closure without sale — individual partners fund run-off; strictest regulatory scrutiny.
- Merger — combined entity typically successor to both; joint run-off structuring.
Timing and market
- 6-12 months pre-cessation — engage specialist broker; quote the run-off market.
- 3-6 months pre-cessation — select run-off structure and provider.
- Cessation day — run-off incepts, primary policy extends.
- Year 1 of run-off — monitor for latent-claim disclosures.
- Year 2-6 of run-off — hold cover, no premium changes on single-premium structures.
Frequently asked
How long does run-off cover need to last?
Depends on profession. SRA six years mandatory. ICAEW two years mandatory. ARB and RICS 'adequate' — typically six years plus for professional negligence; up to 30 years for BSA-touching architects' work under BSA 2022 s.135. FCA-authorised firms follow MIPRU adequacy.
How much does run-off cost?
Highly variable. A six-year SRA solicitors' run-off typically costs 2.5x-3.5x the last annual premium as a single premium. ICAEW two-year run-off often 1.5x annual. Architects and surveyors highly variable depending on work profile and long-tail exposure. Apex quotes what the market returns.
Who pays for run-off in a practice sale?
Negotiated in the SPA. Common structures: seller funds from proceeds, ring-fenced escrow, buyer takes over on completion, price adjustment. What matters is that the run-off is actually in place, funded, and adequate to the tail.
What happens if we cannot afford run-off?
This is a serious problem. For SRA-regulated firms, the SRA Extended Policy Period and Cessation Period rules kick in and the firm faces regulatory consequences. Partners face personal exposure for future claims. Explore alternatives — extended payment terms, portion of sale proceeds, seller loan-note structure — before committing to cessation without run-off.
Can we buy run-off cover from a different insurer than the primary?
Usually yes. Run-off can be placed with the outgoing insurer (simplest) or with another insurer willing to write it (market has to look at the historic risk). A specialist broker tests both routes.
Does run-off cover new claims made against acts done before cessation?
Yes — that is the definition of run-off. It covers claims made during the run-off period arising from acts committed during the original policy period, up to the policy limit and subject to policy terms.
What about acts that only become claims after the run-off period ends?
Uncovered by run-off. If the professional negligence limitation period extends beyond the run-off period (which it typically does), any post-run-off claim leaves the individual professionals personally exposed. This is why long-tail sectors need long-tail run-off.
Can I get run-off cover for a firm I closed without one at cessation?
Very difficult. Retrospective run-off is a specialist market conversation and often not available at any price for firms already ceased. Handle run-off at cessation, not afterwards.