MIPRU 3.2.7R: the PI minimums for insurance brokers and the AR principal question

MIPRU 3.2.7R sets out the minimum PI cover required of FCA-authorised insurance intermediaries. The current rule, which implements the Insurance Distribution Directive (IDD) minimums into the FCA Handbook, requires cover of at least EUR 1,300,380 in respect of each claim and EUR 1,924,560 in aggregate per year (figures set out in MIPRU 3.2.7R and revised periodically for IDD indexation). The sterling equivalents are calculated using the published EBA conversion rate at the time of cover.

The reach of the rule

MIPRU 3.2 applies to FCA-authorised intermediaries carrying on insurance distribution activities. This includes general insurance brokers, retail and commercial intermediaries, and firms whose primary regulatory permission is investment-related but who also carry insurance distribution permissions (for example, an IFA who advises on protection products). Where a firm carries both IPRU-INV 13 and MIPRU 3.2 permissions, the higher of the two minimums applies, not the sum.

The aggregate distinction

MIPRU 3.2.7R, like IPRU-INV 13.1, sets both an each-claim minimum and an annual aggregate. A small intermediary firm holding the regulatory minimum has an aggregate of approximately £1.6 million in sterling terms; one complex commercial claim can substantially erode it. As with IFAs, many brokers buy above the minimum specifically to avoid the aggregate issue.

The Appointed Representative (AR) question

Where the firm is a principal under the Appointed Representative regime (SUP 12), the PI cover must extend to the activities of every AR for which the principal is responsible. The principal carries unlimited liability for the regulated acts and omissions of its ARs under section 39 of the Financial Services and Markets Act 2000. The PI policy must mirror that exposure.

Insurers underwriting principal firms typically ask for a separate schedule of ARs with their gross written premium, sector and territorial scope. The Consumer Duty (PRIN 2A) and the FCA's October 2023 supervisory review of the AR regime have increased the underwriting scrutiny. Principal firms taking on new ARs mid-year may need to notify the PI insurer to maintain cover.

FOS jurisdiction

MIPRU intermediaries fall within FOS jurisdiction in respect of eligible complainants. The FOS award limit of £445,000 (DISP 3.7.4R) applies to complaints against intermediaries as well as advisers. PI cover must respond to FOS awards; an exclusion of regulatory or ombudsman awards in a commercial-grade PI wording would leave the firm in breach.

Our insurance brokers PI insurance guide sets out the MIPRU 3.2 framework, the AR considerations, and the interaction with FOS in detail. Firms with mixed permissions — for example, advising on investments alongside insurance distribution — should also read our IFAs PI insurance guide for the IPRU-INV 13 minimums that apply to the investment side of the business.

Self-insured excess

MIPRU 3.2 limits the policy excess (the self-insured retention) that a firm can carry, with the cap set by reference to the firm's capital position. Where the excess exceeds the cap, the firm must hold additional own funds to make up the difference. This mirrors the approach in IPRU-INV 13 and is designed to ensure the firm can meet claims at the small-value end as well as the large.

Notifications

The SUP 15.3.1R notification rule applies. A firm that identifies a systemic distribution failure — for example, a mis-rated commercial book or a consistent error in IDD information — should consider both an FCA notification and a PI insurer notification. The two are separate processes with separate consequences.

Capital alongside PI

PI is one part of the prudential framework. Firms must also hold the MIPRU 4.4 minimum capital of £10,000 or 5% of annual income (whichever is greater). The PI and capital requirements are independent; one does not substitute for the other.