ICAEW PII run-off cover: the two-year minimum after cessation

~5 min read

Reviewed by Matthew Bartlett, Director · Last reviewed 2026-07-06

When a firm regulated by the Institute of Chartered Accountants in England and Wales ceases to be in public practice, the Professional Indemnity Insurance Regulations made under Bye-law 61 require the firm — or the last remaining principals of it — to maintain PII cover on a run-off basis for a minimum of two years from the date of cessation. That two-year floor is materially shorter than the six-year run-off the SRA requires of solicitors under the Minimum Terms and Conditions, and shorter than the longer periods many high-liability niches within accountancy might sensibly want. This entry explains why the two-year minimum exists, when it is likely to be inadequate, and what run-off placement looks like from a broker's perspective.

The rule and its source

The two-year requirement sits in the PII Regulations, made by the ICAEW Council under the authority of Bye-law 61. It applies to every ICAEW-regulated firm regardless of size, structure or specialism — a sole-practitioner tax adviser, a five-partner high-street firm, and a mid-market audit practice all face the same two-year floor. The clock starts on the date the firm ceases to be engaged in public practice, which is the point at which the firm can no longer be sued as an ongoing business. For a firm that winds down over months, the cessation date is typically the date the ICAEW is notified — not the last day of client work.

Why two years, not six

The rationale is exposure profile. A typical accountancy engagement is annual or event-driven — the tax return for a year, the audit for a period, a corporate finance advisory piece around a transaction — and the claim window on most work tends to surface within one to two years of the work being done. The primary long-tail risk on the accountancy side is tax advice that only surfaces when HMRC opens an enquiry years later, and the material sub-set is a small proportion of overall claims. The regulator's judgement is that two years captures the great majority of the meaningful notification risk for most firms without imposing the six-year burden the solicitors regime carries. For practices with significant historical audit exposure or complex tax planning back-books, the judgement can look aggressive — but the two-year figure is the floor, not a ceiling.

Placement mechanism

Run-off in the accountants' market is placed in one of two ways. The preferred route is extended run-off with the incumbent insurer. The insurer already carries the firm's notification history, understands the book, and has priced the risk before. Continuity of insurer avoids arguments about where a claim should be notified if a matter surfaces in year one of run-off but relates to work done in the final year of active cover. Most placements start with a serious conversation with the incumbent well ahead of the intended cessation date.

The alternative is open-market placement. This happens where the incumbent has left the accountants' PI market, priced the run-off punitively, or declined on claims grounds. The open market for run-off is smaller than the primary market. A firm approaching an open-market run-off from an incumbent decline is usually working with a limited menu.

Pricing

Run-off in the accountants' market is typically quoted as a single premium payable at inception, calculated as a factor of the last active-year premium. The factor varies insurer to insurer and year to year, and depends on the run-off period, the size and mix of the firm, and the claims history. Firms with a clean record can expect a factor that produces a manageable single premium relative to the last active-year figure; firms with a live claim or a difficult back-book may see multipliers that make the placement a material capital call at cessation. Early engagement with the incumbent typically produces the best-priced outcome.

When two years is not enough

Four scenarios warrant serious consideration of extended run-off beyond the two-year minimum. First, any firm with a material historical audit book carries claim risk that can surface well beyond two years — audit engagements often generate claim notifications tied to insolvency proceedings that only crystallise years after the audited period. Second, tax practices with complex planning work carry HMRC enquiry risk that can run to six or seven years from the year of assessment. Third, firms that have advised on transactions — corporate finance, M&A due diligence, valuations — may face claim notifications tied to warranty or misrepresentation windows that extend to three or six years. Fourth, sole practitioners who cease at retirement should not assume the two-year floor is prudent — a retirement claim may end up sitting with the practitioner personally rather than with a corporate entity that can be wound up, and the personal exposure warrants a longer look-back window.

Practical extensions run to three, five or six years, priced accordingly. The cost delta over the two-year minimum is often smaller than firms expect and much smaller than the exposure it neutralises.

Worked example

Illustrative only. A three-partner ICAEW audit firm ceases on 30 April 2026, following the retirement of its senior partner. Historical fee split: 60 per cent audit, 30 per cent tax, 10 per cent advisory. The broker opens run-off conversations with the incumbent in October 2025, six months before cessation. On the incumbent's recommendation and given the audit weighting of the historical book, the firm places a five-year run-off rather than the two-year minimum. Single premium payable at inception, priced as a multiple of the 2025-26 active premium. Cover remains on the same aggregation and each-and-every basis as the active policy, with a claim-only notification obligation and a claims-made trigger for the full five-year period.