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Tough market conditions for Professional Indemnity Insurance

The Grenfell tragedy and the collapse of Carillion, with £1.5billion debts, have conspired to create tough market conditions for Professional Indemnity Insurance in the United Kingdom.

Some businesses have found it difficult to arrange adequate cover with many insurers deciding to move away from offering PII cover to focus on other products with the construction sector seeing a contracted market.

Construction experts report the current pandemic has seen almost all PI insurers start to demand information about insured’s contingency plans, and their liquidity. Last year it was estimated £95m potential capacity had been lost from the UK construction PII market.

Consultants such as architects and engineers need to protect themselves against damages and defence costs arising from their professional services. PII cover is compulsory for all members of the Royal Institute of British Architects (RIBA) while Approved Inspectors have a statutory obligation to purchase PII which complies with the criteria set by the Ministry of Housing, Communities & Local Government.

 In a recent development, their PII will no longer respond for projects where the appointment contains more onerous terms than the Construction Industry Council/Association of Consultant Approved Inspectors (CIC/ACAI) form. This form includes limitations on liability which would otherwise be unacceptable to employers.

One of the features of the “hard” PII market is that consultants may find that their new insurance covers is at odds with the appointments and contracts they have previously agreed with their employers. These appointments often require consultants to maintain PII for a period of 6 or 12 years and the appointments often specify the limit of cover required and that this cover must be “any one claim” and include certain cover extensions.

In this tightening market it is quite likely that the cover previously agreed to is no longer available in the insurance market. it is important that appointments require a consultant to notify employers if there is a change to the cover offered by the PII. For example, PII policies now often exclude cover for fire safety and cladding related claims.

As a result, consultants are having to re-evaluate the type of work they do due to the restrictions on their cover while employers are spending more time and money negotiating consultant appointments and are having to concede to limitations on liability that they previously would have pushed back on.

W Denis Insurance Brokers has a dedicated Professional Indemnity team who can assist both consultants and employers with their PII requirements. We are an independent broker and we are able to access the vast majority of the insurance market. If you would like to discuss your professional indemnity requirements and/or would like to obtain a quotation please contact Daniel Moss at daniel.moss@wdenis.co.uk or on 0044 (0)113 2439812

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