Every professional asks a broker at least once: what limit of PI insurance do I actually need? There is no single number, but there is a framework, and the number falls out of it once the inputs are known. This entry sets out how Apex Insurance Brokers thinks about the question with clients across the professions we serve.
Three separate forces set the floor and the ceiling for any PI limit. The first is the regulatory minimum — the least cover a firm can hold and still be entitled to practise. The second is the contractual requirement — the limit written into engagement letters, framework agreements and appointment terms. The third is the real exposure — the largest plausible single claim any one instruction could produce, and the aggregate exposure across a book of work if several claims arrive at once.
The regulator sets the floor for the right to practise. Clients set the floor for the right to be engaged. On public sector frameworks, on JCT and NEC construction contracts, and on any material commercial appointment, £5 million each and every is a common ask. £10 million appears routinely on larger developments. Framework agreements sometimes require the cover to be maintained for a run-off period of six or twelve years past the last instruction — a point that catches many firms out at renewal.
A limit should never sit below the worst credible single claim the largest instruction could produce. If a firm is advising on a £30 million transaction and the whole transaction could unwind on the strength of the advice given, a £2 million limit is theatre, not cover. This test looks at the loss the client could actually suffer, and often produces a higher figure than the contract requirement.
PI policies are usually written on an "each and every claim" basis, an aggregate basis, or a combination. Firms whose work touches many clients in similar ways — audit, tax opinions, standard-form advice, panel appointments — face the risk of a systemic issue producing several claims at once. Where aggregate exposure is a live concern, either the aggregate limit should be sized for the plausible cluster, or a reinstatement clause should be negotiated to bring the each-and-every limit back after the first claim.
Put the drivers in a stack. Regulatory floor at the bottom. Highest contractual requirement above it. Largest-client single-claim worst case above that. Then add reserve headroom for the fact that limits include defence costs and that a serious claim burns them quickly. The final number is the highest of the four, not the sum.
Consider a four-partner practice whose largest client is a residential developer with 12 blocks in a scheme, each worth around £80 million on completion. ARB Standard 8 requires "adequate" cover; the practice has historically carried £1 million. Their JCT contract on the current phase requires £10 million each and every claim.
Working through the framework: (i) ARB baseline — £1 million as a starting point; (ii) contract requirement — £10 million each and every, non-negotiable; (iii) largest-client single-claim risk — a serious design defect across a completed block could plausibly produce a £15 million claim once remediation, delay and consequential loss are counted; (iv) aggregate consideration — if a design issue affects several blocks the aggregate could run to two or three times that.
The answer is a £15 million each-and-every limit with a reinstatement, and an annual aggregate of £30 million. That is a specification a broker can take to market. In practice it will be priced as a layered programme — a primary layer with reinstatements, then one or more excess layers stacked above it.
Where aggregate cover looks thin, a reinstatement doubles the effective each-and-every capacity for the year at a fraction of the cost of doubling the primary limit. Whatever limit is chosen, the Insurance Act 2015 places a duty of fair presentation on the commercial insured at inception and renewal. Fee income, work mix, largest matter values, past claims and near-misses all have to be presented clearly and accessibly. A limit chosen against a presentation that later understates the exposure risks being unwound at the very moment it is needed.
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.