Wiki — Mid-term adjustments

A mid-term adjustment (MTA) is a change to a professional indemnity policy made between the inception date and the renewal date. Some are administrative and cost nothing. Others carry an additional premium and require an endorsement. This entry sets out what triggers an MTA, how insurers price them, and what to look for in the endorsement wording before you sign it back.

What triggers an MTA

A PI policy is priced against the practice as it was described at inception. Anything that materially changes that description during the policy year is a candidate for an MTA. The common triggers are:

• Change of legal entity. A partnership converting to an LLP, a sole trader incorporating, a merger of two practices into one — the insured needs to be re-named on the schedule.
• Change of activity mix. Taking on work outside the professional services described at inception (audit for a firm that had never held an audit registration, planning work for an architect who had only done small residential, DB pension transfer advice for an IFA who had not previously done any).
• Change of principals. New partners, new directors, a departing principal with the practice continuing. Each carries a claims-history disclosure and a residual-liability question.
• Change of fee income. Most PI wordings tie the premium to a fee estimate at inception with a settlement mechanism at year-end. A material overshoot in-year is a disclosure event.
• Acquisition of another practice or book of work. The exposure sitting behind that book joins yours from the acquisition date, and needs to be disclosed.
• Geographical extension. Opening an office in another jurisdiction, or taking on work with a US, Canadian or EU element that the inception policy did not contemplate.
• New material claim or circumstance. Any circumstance that might give rise to a claim is a notification, not just an MTA — but the two can arise together.

How MTAs are priced

There is no single formula. Underwriters price an MTA against the change to the risk they originally priced, and the calculation typically has three inputs:

• The change itself. A new partner is not necessarily an increase in exposure — it depends on their claims record, seniority and work type. An extension into a higher-risk activity is almost always an increase.
• The time remaining on the policy. An MTA at month two is priced against ten months of remaining risk; an MTA at month eleven against one month. Most insurers apply pro-rata premium adjustment as the starting point.
• Minimum premium considerations. Many insurers apply a minimum additional premium for administrative endorsements — often £50 to £150 — regardless of exposure change.

Some MTAs carry no additional premium: an address change, a change of banking arrangements, an update to key contact details. Others (adding a partner with a clean history in the same work type) may be endorsed at nil AP. The broker should ask, and the underwriter should be prepared to justify a positive AP by reference to the change.

The endorsement wording — what to look for

An MTA is not effective until the insurer issues an endorsement and the insured agrees the wording. The endorsement should state:

• The effective date of the change (which may differ from the endorsement issue date).
• The precise wording of the schedule change — the new insured name, the added activity, the revised fee estimate.
• Any change to conditions, exclusions or the excess.
• The additional or return premium.
• Confirmation that all other terms and conditions of the policy remain unchanged.

Read the wording carefully. An endorsement that adds an activity should not silently introduce a claims-preparation exclusion or narrow the definition of professional services. If the wording introduces something you did not expect, ask before you sign.

MTAs and disclosure — the same duty applies

The Insurance Act 2015 duty of fair presentation applies at inception, at renewal, and on any variation of the policy. An MTA is a variation. That means the material facts relevant to the change should be disclosed with the same rigour as at inception — the new activity described honestly, the new partner's history disclosed in full, the new work volume estimated realistically. Understating any of those things does not save premium; it stores up a remedy the insurer can apply at claim.

When an MTA is not enough — separate cover

Sometimes an activity is outside the appetite of the primary insurer even at additional premium. In those cases the broker will look at either a change of primary insurer at the next renewal, or a separate specialist policy sitting alongside the main PI cover — for example a specific project policy for a large single engagement, or a cyber liability policy sitting alongside the PI. An MTA cannot force a wording to cover something the insurer does not want to write; it can only capture what the insurer agrees to add.

Timing — do not leave it to renewal

An MTA that should have been requested in month two and is instead disclosed at renewal in month twelve is a disclosure problem, not a paperwork problem. If the practice has changed materially, notify the broker within days rather than weeks. Insurers price MTAs cleanly when they arrive in real time and less cleanly when they arrive as part of a renewal reconciliation.