Appendix A: 2017 professional indemnity insurance (PII) run-off consultation summary

1 Background

  1. RICS is aware that RICS regulated firms have not always been able to obtain PII run-off easily. If the marketplace will not sell them a policy, or will only do so at an unsustainable cost, this affects the ability of RICS regulated firms to close and cease trading in an orderly way.
  2. Such concerns led to the removal of the six-year mandatory run-off requirement in the RICS PII policy. The change was made to avoid a situation where members were being forced into a disciplinary process when they had been unable to secure affordable run-off despite reasonable efforts to do so. The 2008 economic downturn was also a factor as it exacerbated the access of firms to the required levels of run-off.
  3. In 2017, the RICS UK and Ireland Regulatory Sub-Board agreed to carry out a review of PII run-off cover for firms closing or ceasing to trade because of concerns that the existing policy did not give enough certainty and assurance.
  4. The main aims of this review were to:
    - ensure that private consumers are adequately protected; and
    - enable regulated firms to close by being able to obtain the run-off cover they require.

  5. RICS engaged with key stakeholders to help understand the current problems. These activities included:
    - 'RICS Professional Indemnity Insurance Run-off Review: Summary of Data Collection': A call for information was distributed amongst the insurance sector to identify knowledge gaps and describe the current practices in the sector.
    - 'PII Run-off Review: Call for information': Focused on direct engagement with firms deemed to be most at risk by the policy, representatives from small business groups and key multi-stakeholder groups.
    - End Users Survey: RICS commissioned Ipsos MORI to investigate stakeholder views including PII expectations and experience. RICS also approached consumer organisations for insights.

  6. The information received from these engagements were considered by the Sub-Board and they decided to consult on five options:
    - introduce terms to the minimum wording policy that the last insurer must provide at least six years' run-off cover subject to the payment of annual premiums;
    - extend the Assigned Risks Pool (ARP) to provide risk cover;
    - mandate the incumbent insurer to provide six years' run-off under the minimum wording policy;
    - require the incumbent insurer to provide six years' run-off under the minimum wording policy for consumer claims only; or
    - create a special purpose fund that covers all run-off for RICS firms.

  7. Combinations of the above options were also considered.
  8. The consultation ran for eight weeks, closing on 8 January 2018.