When a professional firm ceases trading, its professional indemnity (PI) exposure does not stop on the last day of practice. Claims can emerge years after the work was delivered, and each looks back to the cover in force at the point the claim is made, not the cover in force when the work was done. That is why regulators require ceasing firms to arrange run-off cover, and why firms that carried layered towers during trading need to think carefully about whether each layer has been extended into the tail.
PI policies in the UK are written on a claims-made basis. Once a firm closes, there is no live policy to notify against unless run-off cover is in place. Run-off is a specific extension — either a new standalone policy or an endorsement to the expiring one — that keeps the firm on cover for claims first made and notified during the run-off period, arising from work done before cessation.
The regulator-set minimum periods vary by profession. Under the SRA Indemnity Insurance Rules 2020, solicitors' firms in England and Wales must maintain six years of run-off on terms no less favourable than the SRA Minimum Terms. The ICAEW PII Regulations 2020 require a two-year run-off tail for chartered accountants. The ARB Code Standard 8 obliges architects to maintain adequate cover for as long as it is reasonably practicable — in practice normally six years, longer where Building Safety Act exposure is in scope.
Because the regulatory rules speak to the firm's core PI obligation, the run-off duty almost always attaches to the primary layer. Most participating insurers will offer run-off terms on the primary policy — either at a set multiple of the expiring premium payable up front, or on an instalment basis where the wording allows. The primary layer is where the mandatory minimum cover sits, and it is normally the layer regulators inspect for compliance.
Excess layers are a different matter. Regulator rules typically fix a minimum limit — £2m or £3m any one claim depending on the profession — and firms that carry additional excess layers above that minimum do so as a matter of commercial judgement, not regulatory duty. It follows that excess-layer run-off is not automatic. Each excess insurer decides, at cessation, whether it will offer run-off terms, on what basis, and at what price. Firms sometimes assume arranging primary run-off carries the tower with it. It does not.
Where an excess policy is written on a "following form" basis, it mirrors the terms, conditions and exclusions of the primary layer. In principle this makes run-off simpler: if the primary is extended into run-off, the excess follows the same shape. In practice the following-form wording still needs to be checked — some excess wordings follow form only on coverage, not on duration or extensions, and the run-off endorsement may not automatically flow up the tower.
Stand-alone excess wordings underwrite the run-off period afresh. The excess insurer will consider the ceasing firm's claims history, work-type profile, and the length of run-off required, and price the extension accordingly. Some insurers decline stand-alone excess run-off altogether. Under the Insurance Act 2015, the ceasing firm still owes a duty of fair presentation when placing or extending cover.
Six or ten years is a long time to rely on one insurer's balance sheet. If a primary run-off insurer becomes insolvent partway through the tail, the excess layer's response depends on the wording. Some excess policies drop down to fill the gap; many do not, and instead require the primary limit to have been paid in full before the excess attaches. Firms carrying long-tail exposures — architects and structural engineers in particular — should have this drop-down question answered in writing before cessation.
The most frequent gap Apex sees on cessation reviews is a firm that has extended the primary layer into run-off but let the excess layer expire without replacement. The tower on the last day of trading is not the tower for the six years that follow.
An architectural practice ceased trading in 2024. Its expiring cover was £5m primary plus £5m excess. The firm arranged six years of primary run-off in line with ARB expectations, but the excess policy expired at cessation with no run-off replacement arranged. In 2028 a historical claim emerged relating to a residential scheme completed in 2019, valued at £7m. The primary run-off responded up to its £5m limit. The excess layer had expired at cessation and provided no cover for the £5m to £7m band — a £2m exposure to the former principals personally. Under section 135 of the Building Safety Act 2022, the 30-year retrospective lookback for higher-risk buildings intensifies the problem: claims can emerge decades after the work was done, long after any reasonable run-off period has ended.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.