Run-off cover is the professional indemnity policy that responds to claims made after a firm has ceased trading, in respect of work carried out before cessation. The premium quoted for that cover varies materially between firms of otherwise similar size and turnover, and it varies again between one placement window and the next. This entry explains the underwriting factors that push a run-off quotation up or down, so that a professional considering cessation can understand what is driving the number in front of them.
Insurers writing run-off cover for UK professionals typically price on one of two bases. The first is a single lump-sum premium for the full run-off period, paid at inception. The second is an annually renewable arrangement, where a premium is charged each year for the duration of the run-off, subject to the insurer continuing to offer terms. Some professions have prescribed minimum run-off periods in their regulatory rulebook. Solicitors in England and Wales sit under the SRA Minimum Terms and Conditions, which mandate six years of continuous run-off cover following cessation.
A common underwriting shorthand is to express the run-off premium as a multiplier of the firm's last annual PI premium. For a six-year placement the multiplier can typically fall within a range of around one to two-and-a-half times the last annual premium, with longer periods attracting higher multipliers. That is a market observation, not a quotation and not a promise. Every placement is underwritten on its own facts.
Insurers look at what the firm was doing in the years leading up to cessation, not simply what it did on its last day. The book of work matters. A firm concentrating on lower-severity, higher-volume advice presents a different risk profile from a firm that took on a small number of high-value, complex mandates. Complexity, deal size, cross-border exposure and unusual specialisms all feed into the underwriter's view of the tail risk.
A clean claims record over the preceding five to ten years tends to support a more favourable run-off quotation. A record showing one or more paid claims, particularly recent ones, tends to move the multiplier upwards. Insurers weigh not just the number of claims but their severity, cause and whether patterns emerge.
Any circumstances notified to the incumbent insurer will be picked up by the run-off underwriter as part of the placement conversation. Insurers price for known risk. A notified circumstance that has not yet crystallised into a claim is a live matter the run-off market will factor into its assessment. Under section 3 of the Insurance Act 2015, the firm owes a duty of fair presentation to the run-off insurer at placement, and material circumstances must be disclosed in a manner reasonably clear and accessible to a prudent underwriter.
The longer the run-off, the higher the total premium. A six-year period, the SRA minimum for solicitors in England and Wales, will typically cost less overall than a ten- or fifteen-year period taken by architects, surveyors or consultants who want cover extended beyond a statutory minimum. Some professionals choose longer run-off to align with the practical long-tail nature of their work.
The limit carried through into run-off need not match the limit held in the last active year, and some firms right-size the limit at cessation. A lower limit reduces the premium; a higher limit increases it. The judgement is a balance between affordability and the exposure the firm's historic work realistically presents.
PI insurance is cyclical. In a soft market, insurers compete on price and terms; in a hard market, capacity contracts and premiums rise across the board. A firm placing run-off during a hardening cycle will see the effect in the quotation. This is not something the firm can control, but it is something that can be planned for by starting the conversation early rather than at the point of cessation.
Firms that plan for cessation three to five years in advance tend to secure smoother run-off pricing than those that place at the last minute. Early planning lets the firm manage its claims experience, close out notified circumstances where possible, tidy up file retention and demonstrate a considered exit to the run-off market. It also allows the broker to test appetite across a wider set of insurers.
Consider two firms of identical size, with the same last annual PI premium and the same profession. Firm A has a clean claims record over ten years and no notified circumstances at cessation. Firm B has a recent notified circumstance in the region of two hundred thousand pounds that has not yet resolved. Firm A will typically secure a run-off quotation at a materially lower multiplier than Firm B, and will see more insurers willing to quote. Firm B may find placement harder in a hard market, and may need to accept a higher multiplier, a higher excess or a lower limit to secure terms. The two firms are otherwise identical; the difference sits entirely in the risk each presents to the run-off market.
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.