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    Run-off coverage

    From the Apex Insurance Wiki, a citation-driven UK insurance reference
    At a glance
    CategoryCore PI concepts
    Also known asrun-off cover, run-off insurance
    First codifiedmarket practice developed alongside claims-made PI; codified in regulator rules from the 1990s onwards
    Related legislationInsurance Act 2015, Limitation Act 1980, Solicitors Act 1974

    Run-off coverage is the continuation of a claims-made professional indemnity policy after the insured firm has ceased trading, designed to indemnify civil liability claims made against the firm for work performed before closure.

    Definition §

    Run-off coverage exists because the claims-made structure of professional indemnity (PI) policies does not anticipate the firm continuing to operate when a claim is made. A claims-made policy responds only if it is in force at the date the claim is first asserted against the insured. When a firm closes, the immediate effect is that, absent run-off cover, any claim made after closure would fall on no policy at all, leaving former clients without recourse and former partners or members exposed to personal liability.[1]

    Run-off cover preserves the structure of the policy in force at closure. The retroactive date, the insuring agreement, the limit of indemnity, and most policy conditions continue. The single substantive change is that the policy no longer covers new acts (because the firm is not undertaking new work). It covers claims first made during the run-off period that arise from acts performed between the retroactive date and the date of closure.

    Run-off cover is normally written for a fixed period, typically six years, which matches the standard contract and tort limitation period under sections 5 and 2 of the Limitation Act 1980.[2] Some professions extend run-off well beyond six years to address latent claims that can emerge under section 14A of the Limitation Act 1980 and the Latent Damage Act 1986.[3] The solicitors' profession does so through the SRA Minimum Terms and Conditions (MTC), which require six years of run-off as a minimum, supplemented by post-six-year arrangements administered through the Solicitors Indemnity Fund (SIF) successor structures.[4]

    For regulated insurance intermediaries, MIPRU 3.2.7R sets minimum PI cover and indirectly requires run-off where the firm ceases to carry on regulated activities.[5] For RICS-regulated firms, ICAEW members, and ARB-registered architects, the respective rules require continuous PI cover that includes a run-off element on closure.[6][7][8]

    The statutory basis for run-off lies primarily in limitation law and in the regulatory rules of the relevant professional body. The Limitation Act 1980 sets a six-year limitation period for contract and most tort claims, with section 14A providing a three-year extension running from the date of knowledge of the material facts, and the Latent Damage Act 1986 imposing a 15-year long-stop.[2][3] Run-off cover must accommodate this extended exposure if it is to be meaningful in protecting former clients.

    The Insurance Act 2015 governs the placement of the run-off policy itself. The duty of fair presentation continues to apply at the point of arranging run-off; the firm must disclose any known circumstances and the full history of the firm's practice.[9] Section 13A of the Insurance Act 2015, on claims handling duty, imposes an implied term to pay sums due within a reasonable time, which continues to apply to claims under a run-off policy.[10]

    The Solicitors Act 1974 underpins the regulatory regime for solicitors and provides the framework within which the SRA prescribes minimum PI and run-off requirements. Section 36 of the Act establishes the Solicitors Compensation Fund as a separate safety net for clients who suffer loss as a result of dishonesty or failure to account for client money, complementing the PI run-off regime but not replacing it.[11]

    For insolvent firms, the Third Parties (Rights against Insurers) Act 2010 permits a third-party claimant to proceed directly against the insurer of an insolvent insured. Where the insurer is the run-off provider, the claimant takes the rights of indemnity that would have belonged to the former firm.[12]

    How it works in practice §

    Run-off cover is typically arranged by the firm at the point of closure, with the existing insurer continuing to provide cover for a defined period. The premium is generally a single lump sum paid up-front, calculated as a multiple of the last annual premium. Six years of run-off is commonly priced at between two and three times the expiring annual premium, although the exact loading varies by profession, claims experience, and market conditions.

    The run-off policy mirrors the expiring policy in most respects but contains a run-off endorsement that specifies the duration, the retroactive date, the limit of indemnity (often expressed as a per-claim and aggregate limit available across the entire run-off period rather than annual reinstatement), and the persons insured. Cover normally extends to former partners, members, employees, and consultants in respect of work undertaken in the name of the firm.

    During the run-off period, claims are handled in the same way as during active trading. Notification obligations continue, although in practice they fall on the former partners or members rather than on a functioning firm. The run-off insurer is entitled to the same cooperation, information, and conduct of defence rights as the original insurer would have been. Where the limit of indemnity is consumed during the run-off period, no further cover is available.

    The run-off period typically ends six years after closure, although some professions extend this. In the solicitors' profession, run-off continues beyond six years through arrangements coordinated by the SRA in conjunction with the SIF successor structures. The SIF, originally established by the Law Society in 1987 as the compulsory mutual indemnity scheme, closed to new claims in September 2000 when the open market replaced it. It continued in run-off, providing post-six-year run-off cover for closed firms; arrangements were extended in 2017, 2022, and 2023, with the SRA confirming continuation of post-six-year run-off arrangements via SIF Ltd and successor structures.[4]

    Common variations §

    Variations include the duration of run-off (typically six years, but extending to nine, 12, or 15 years for some professions and some bespoke wordings), the structure of the limit (a single aggregate across the period versus an annual aggregate within each year of run-off), and the persons insured (whether former employees and consultants are included).

    The pricing structure varies. Some markets offer a single up-front premium that locks in cover for the full run-off period. Others split the premium across instalments, with the risk that future non-payment terminates cover. A few markets offer a renewable annual run-off policy, which provides flexibility but exposes the former firm to insurer withdrawal.

    Run-off cover for individual practitioners can be arranged where appropriate. A sole practitioner who closes their practice typically arranges run-off in their personal name. A partner who leaves a firm that continues to trade is usually covered under the continuing firm's policy for past acts, although a personal run-off policy may be arranged where the continuing firm declines to indemnify or has insufficient cover.

    For LLPs and limited companies, the legal entity remains in existence after trading ceases unless formally dissolved. Run-off cover protects both the entity and the former members or directors. On dissolution, the rights under the run-off policy may pass to former members in the form of an indemnity contingent on the run-off policy responding.

    Example §

    A four-partner accountancy partnership closes on 31 December 2026. The retiring partners arrange six years of run-off cover with the existing insurer at a single premium equal to two-and-a-half times the expiring annual premium. The run-off endorsement preserves the retroactive date of 1 January 2010, the aggregate limit of indemnity of two million pounds (single aggregate across the run-off period), and the policy conditions. In 2030, a former audit client issues proceedings alleging negligence in a 2019 audit. The run-off policy responds, the insurer appoints defence solicitors, and the claim is managed under the same wording that applied to the firm in active practice. If the claim had been issued in 2034, after the six-year run-off period had expired, no policy would respond, and the former partners would be exposed unless further run-off cover had been arranged.

    See also §

    References §

    1. ↑ Insurance Act 2015 — https://www.legislation.gov.uk/ukpga/2015/4
    2. ↑ Limitation Act 1980, sections 2, 5, 14A — https://www.legislation.gov.uk/ukpga/1980/58
    3. ↑ Latent Damage Act 1986 — https://www.legislation.gov.uk/ukpga/1986/37
    4. ↑ SRA Indemnity Insurance Rules — https://www.sra.org.uk/
    5. ↑ FCA Handbook, MIPRU 3.2.7R — https://www.handbook.fca.org.uk/handbook/MIPRU/3/
    6. ↑ RICS Rules of Conduct 2022 — https://www.rics.org/
    7. ↑ ICAEW PII Regulations — https://www.icaew.com/
    8. ↑ ARB Code of Conduct — https://www.arb.org.uk/
    9. ↑ Insurance Act 2015, sections 3-8 — https://www.legislation.gov.uk/ukpga/2015/4
    10. ↑ Insurance Act 2015, section 13A — https://www.legislation.gov.uk/ukpga/2015/4
    11. ↑ Solicitors Act 1974, section 36 — https://www.legislation.gov.uk/ukpga/1974/47
    12. ↑ Third Parties (Rights against Insurers) Act 2010 — https://www.legislation.gov.uk/ukpga/2010/10
    This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
    Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.