Changes to RICS PII Cover
Published: Tuesday, 20 August 2024
Make sure you're up to date with the latest changes to RICS Professional Indemnity Insurance (PII) Cover in the UK & Ireland
Background to RICS Professional Indemnity Requirements
All RICS member firms have a requirement to hold Professional Indemnity cover at a minimum level from an approved insurer, the parameters of which are set by RICS. The aim of the requirements is to ensure adequate cover is place for the firm and to ensure the financial protection of clients. This has proved challenging over recent years, particularly in relation to fire safety which has been a significant issue for surveyors.
Following the Grenfell tragedy in 2017, there was uncertainty and concern over how widespread fire safety issues may be and it became apparent in 2019 that fire safety coverage was not available in the professional indemnity market. This led to the pool of approved insurers diminishing, rates increasing and restrictions in cover becoming more prevalent. There were also exposure concerns following the ‘EWS’ (external wall survey regime) which enabled fire safety remediation works to be reflected in a building’s valuation. The COVID-19 pandemic then caused further challenges for surveyors in an unprecedented working environment.
Following these events and the resultant capacity and coverage challenges in the PII Market, RICS changed the terms of their minimum approved wording. From April 2020, RICS permitted insurers to apply blanket fire safety exclusions, including in relation to EWS work. Throughout 2020 and early 2021, RICS worked with the insurance market to restore some fire safety cover, and it was agreed in May 2021 that insurers were required to provide cover for buildings up to 4 storeys (insurers were still able to apply exclusions to above that level).
Further challenges were presented to surveyors with the introduction of the Fire Safety Act 2021 and the Building Safety Act 2022 which created further roles and responsibilities and increased limitation periods for certain claims.
By 2023, there was an improved knowledge of fire safety issues and more familiarity with the new legal framework that was in place. Insurers were also providing over and above the minimum insurance requirements and there were no insurer exits from the approved insurer pool (there was also an additional insurer).
Following the RICS consultation in Autumn 2023 on the new 2024 wording, there was a consensus that there was increased insurer appetite and wider coverage being provided in the professional indemnity market. Following this consultation, effective 01 July 2024, RICS has enhanced fire safety cover within its minimum wording as well as bringing cyber coverage in line with other PII wordings.
July 2024 Changes to RICS Minimum Terms of Cover
The key changes effective from 01 July 2024 are as follows:
Buildings up to 4 storeys
Cover remains on a full civil liability basis with no retroactive date exclusion permitted. Limits of indemnity continue to be permitted on an annual aggregate basis and to include defence costs; excesses are allowed to apply to defence costs.
Buildings of 5 storeys or more (UK and Ireland)
Cover is now mandatory for fire safety claims (excluding EWS and FRAEW work) with a retroactive date of 01 July 2024 (insurers will therefore not be liable for work undertaken prior to this date). Cover is on a negligent act, error or omission basis (rather than full civil liability). Limits of indemnity are permitted on an annual aggregate basis and to include defence costs; excesses are allowed to apply to defence costs as per the existing requirements.
EWS and FRAEW (UK, excluding Ireland)
PI insurance must now cover claims relating to EWS and FRAEW work for buildings up to 18 metres, only where work is undertaken by a professional who has passed the RICS External Wall Systems Assessment Training Programme.
As per the above, this only applies to professional services undertaken on or after 1 July 2024 and cover is permitted on an annual aggregate basis and to include defence costs; excesses are also able to apply to defence costs as per existing requirements.
Various other mandatory requirements remain as previously, including the minimum limits of indemnity and maximum excesses allowed (sliding scales based on a firm’s turnover). RICS has also brought Cyber Coverage in line with the insurance market enabling insurers to apply the International Underwriting Association’s model clause (IUA 04017 Professional Indemnity Cyber and Data Protection Law Endorsement).
Insurance Implications
The changes to the 2024 RICS Minimum approved wording reflect a much more positive outlook for RICS members, brokers and insurers. There are still challenges with the retroactive date being applicable to the wider form of cover for buildings of 5 storeys and over, which does mean surveyors continue to be exposed for historic work that took place prior to 01 July 2024.
Surveyors will therefore need to continue to review their past exposure and ensure they provide insurers with detailed and accurate information to avoid any issues with claim notifications, but also to achieve the best possible terms and engage new and existing insurers. The importance of record keeping of work performed is essential to aid future risk submissions.
Brokers will have an essential role in presenting risks to insurers and obtaining the widest forms of cover at the best price; this includes working with firms to obtain the relevant information to allow insurers to form a proper understanding of the risk. By providing insurers with a comprehensive presentation of the risk, appetite will be more easily identified, and best possible terms obtained.
We would encourage firms to engage with their broker as early as possible and engage with other key individuals in the business to obtain the relevant information to provide a comprehensive presentation of the risk.
Author Bio
This article was written by Account Executive, Alex Williams. Alex started her career in insurance in 2005 at an independent insurance broker and over time became responsible for some of their largest and most prestigious clients, with a particular focus on financial services and construction risks.
Alex achieved her Chartered Broker Status in 2010 and won the BIBA UK Young Insurance Broker of the Year in 2011. She also completed her Certificate in International Risk Management in 2020 which came out of a desire to understand her clients from a risk based perspective.
Alex has since gained experience working within a variety of different roles, including in the FINPRO division of two of the top Global Brokers as a Professional Indemnity specialist for Construction Professionals including Architects and Surveyors as well as D&C.
Alex joined the Ntegrity team in 2024 as our Construction PI specialist and can be contacted via phone or email:
01454 800 845
Alexandra.Williams@ntegrity.co.uk
