ICAEW Bye-law 61 explained

Category: Professional regulation · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~6 min read

What the phrase refers to

ICAEW's constitutional documents — the Royal Charter, the Supplemental Charter of 1948 and the bye-laws made under them — give the Institute power to make regulations binding on members and member firms. Practitioners commonly refer to the professional indemnity obligation by a bye-law number, but the document a firm and its broker actually work from is the ICAEW Professional Indemnity Insurance Regulations. The current edition records that the regulations were originally issued by authority of ICAEW Council on 1 November 1998 and were last amended with effect from 1 September 2024 by the ICAEW Regulatory Board, in accordance with clause 16 of the Supplemental Charter of 1948 and Principal Bye-law 49.

The practical point is simple: if you are checking compliance, check the PII Regulations. A bye-law reference will not tell you what limit to buy, what excess is permitted or what the policy has to say.

Who has to comply

The regulations apply to firms and to members holding a practising certificate who are engaged in public practice. Members with a practising certificate who are not engaged in public practice are treated differently and do not receive the same annual return. Firms are required to hold a policy of qualifying insurance, which means a policy placed with a participating insurer and written on terms at least as wide as ICAEW's approved minimum policy wording. ICAEW publishes the list of participating insurers and the current minimum wording, and updates them annually.

Every firm must complete an annual return to ICAEW confirming compliance, and the relevant ICAEW committee can require further information and evidence, or require a firm to submit to an investigation at its own expense.

The minimum limit of indemnity

The general rule is that the minimum limit of indemnity in each policy year must be at least £2 million for any single claim and in the aggregate. Cover above that level need not be written on the approved minimum wording, and ICAEW is explicit that £2 million is a floor rather than a recommendation: firms are expected to consider whether their own exposure requires more, or requires cover on an any-one-claim rather than an aggregate basis.

There is an alternative for smaller practices. A firm whose gross fee income is less than £800,000 is not required to meet the £2 million figure, and instead must hold a limit equal to two and a half times its gross fee income, subject to a minimum of £250,000. Gross fee income should normally be taken from the firm's most recently completed accounting year, and must include income for work subcontracted to others unless it is clearly shown as a disbursement and the client knows the firm is not taking professional responsibility for it. The mechanics of that calculation are dealt with separately.

Two overlays sit on top. A firm licensed under ICAEW's Designated Professional Body arrangements, or authorised by the FCA, to carry on insurance distribution activities must meet whatever limits the FCA prescribes for those activities; that may form part of, or be in addition to, the limit required for the firm's other work. An accredited legal services firm must hold at least £500,000 for any one claim in respect of authorised probate and estate administration work.

Excess, defence costs and the approved wording

A qualifying policy may carry an aggregate excess, but the maximum aggregate excess across a policy year must not exceed the higher of £3,000 or 3% of the firm's gross fee income. That is a cap on the total the firm can be required to pay in excesses in a year: once per-claim excess payments have reached the cap, no further excess is payable in that period.

One feature of the approved minimum wording is worth flagging to any firm comparing quotations. The policy excess must not apply to the payment of defence costs, unless the claim arises from work that required FCA authorisation. That is a materially better position than many commercial policies offer, and it is a reason to check that a proposed wording really is compliant rather than merely similar.

Run-off cover on cessation

Securing run-off cover after a firm ceases to practise is mandatory, because professional indemnity cover is written on a claims-made basis and claims frequently arrive after the work has stopped. A ceased firm should maintain run-off cover for at least two years and, at the end of that period, take all reasonable steps to put compliant run-off cover in place for a further four years. As a minimum, run-off cover must comply with the same limits of indemnity required of a trading firm.

Participating insurers must tell ICAEW if a firm declines an offer of run-off cover, and the relevant committee treats failure to arrange it as a serious matter. Succession, merger and retirement plans should therefore be discussed with a broker before the firm stops trading, not afterwards.

Large firms and waivers

A firm with gross fee income above £50 million is not required to place a policy of qualifying insurance and may make its own arrangements, but it must still have appropriate arrangements in place to meet claims arising from its public practice, and compliance is monitored. Firms in that bracket should record what provisions they have made and review each year whether they remain within the exemption.

Transitional arrangements applied when the current edition came into force: firms whose qualifying policy incepted or renewed in the twelve months before 1 September 2024 were given a grace period on certain provisions until their existing policy ended or 1 September 2025, whichever came first. That grace period has now passed, so the regulations apply in full.

Why it matters

The PII Regulations are a compliance obligation with a hard edge: the annual return asks a direct question, and the answer is auditable against the policy schedule. But the more common failure we see is not a missed limit — it is a firm that meets the minimum and stops there, when its fee base, its client sizes or its specialist work have moved well beyond what the floor was designed for. The minimum is the start of the conversation, not the end of it.

Frequently asked questions

What is ICAEW Bye-law 61?

It is the shorthand used for ICAEW's requirement that members and firms in public practice hold professional indemnity insurance. The operative detail sits in the ICAEW Professional Indemnity Insurance Regulations, the current edition of which took effect on 1 September 2024, so that is the document to check for limits, excess and wording requirements.

What is the minimum limit of indemnity for an ICAEW firm?

At least £2 million for any single claim and in the aggregate in each policy year. Firms with gross fee income below £800,000 may instead hold two and a half times gross fee income, subject to a minimum of £250,000. Additional minimums apply to insurance distribution and accredited legal services work.

How much excess can an ICAEW firm carry?

A qualifying policy may include an aggregate excess, but the maximum aggregate excess in a policy year must not exceed the higher of £3,000 or 3% of the firm's gross fee income. The excess must not apply to defence costs unless the claim arises from work requiring FCA authorisation.

How long must run-off cover be maintained after a firm closes?

A ceased firm should maintain run-off cover for at least two years and then take all reasonable steps to put compliant cover in place for a further four years, on limits that meet the same minimums as a trading firm. Failure to arrange it is treated as a serious matter.

Related entries

• ICAEW PII and Bye-law 61: the full guide
• ICAEW PII aggregation for audit firms
• PI insurance broker for accountants
• Run-off cover
• Professional indemnity insurance

This entry is part of the Apex Insurance Wiki. It states the position as at August 2026. Last reviewed 2026-08-22. Next review: 2027-02-22. It is general insurance information, not legal advice, and not regulated advice on a specific policy.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.