Changes to RICS PII requirements: Policy Wording updated
The RICS requires all regulated firms to have, "adequate and appropriate professional indemnity cover that meets the standards approved by RICS". This must meet the minimum terms, updated from time to time, required by the RICS as surveyors and their Professional Indemnity brokers will be aware.
The RICS identified numerous emerging issues affecting the PII market.
So that the RICS can maintain consumer protection at a high level, in response to the issues, between 27 February 2025 and 4 April 2025, they ran a consultation on a number of changes to the RICS PII terms. We summarise these below.
Consumer run-off cover
Automatic run-off cover when a regulated firm ceased trading, has been a staple since 2019. Providing cover for a period of six years from the date of a policy's expiry, it ensures consumers have a period of PII protection. However, it has not been clear when this steps in; how it works; what the insurer charges are; or the communication between insurers and insured firms in the event of a firm ceasing to trade. To address operational issues, and ensure consumer protection, the RICS consulted on five key issues:
- Cancellation if premium not paid.
- Clarification of consumer/commercial run-off cover.
- Insurer's right to charge a premium.
- Notification to insurers.
- Gap between stop date and policy expiry.
Clearer provisions for run-off cover in the Minimum Policy Wording were welcomed by the majority. However, costs and complex new notification requirements were a concern for RICS regulated firms whilst insurers were worried about financial exposure in premiums were paid/only part paid. Suggestions included clarity in relation to premium charges and enhancing procedures for credit risk and prompt communication. The RICS set out two approaches to handle the cost of run-off cover on which it asked for views. On balance, RICS-regulated firms preferred the predictability of bundled pricing but insurers liked the idea of charging separately when a firm ceased trading due to the flexibility and risk management.
The RICS has amended the Minimum Policy Wording to clarify and reinforce that run-off cover applies automatically for six years after a firm ceases training provided at least part, if not all, of the premium is paid, even when there is an insolvent situation or in cases of financial distress. The revised wording removes the requirement for firms to notify insurers when they cease trading in order for run-off cover to attach even though insurers advocated for this to remove uncertainty about policy triggering. The RICS has said this prioritises protection for consumers and removed administrative barriers. Insurers note this will leave uncertainty surrounding the trigger of cover.
Fire Safety
The RICS updated Minimum Policy Wording of July 2024 following consultation in 2023 on PII, resulted in fire safety updates to coverage for buildings of five storeys and above as well as external wall assessments (EWS) and fire risk appraisals of eternal walls (FRAEW). You can read our previous article about this here.
RICS considered three key changes for consideration:
- Clarification of negligent act, negligent error, or negligent omission coverage. Some insurers wanted clarification.
- Return to pre-2020 coverage. This would reinstate full civil liability fire safety coverage on any one claim basis. The BSA 2022 has provided clarity on roles and responsibilities around fire safety so insurers can underwrite such risks.
- Definition of fire safety. IUA raised concerns, specifically that "external cladding systems, balconies or external wall system (including any insulation and/or fire breaks which form part of the wall system) of any building" is too restrictive.
There was strong support for clarification of the Minimum Policy Wording received to ensure that relevant claims are covered under civil liability, thereby avoiding unintended inclusion of non-negligence-based fire safety claims and reducing ambiguity. Both RICS-regulated firms and insurers wanted clarity of wording for fire safety coverage. There were also some issues over understanding legislation.
Most insurers opposed reinstating full civil liability coverage for buildings five storeys and above, citing ongoing uncertainty around fire safety risks, unresolved legacy claims, retrospective liabilities, and the potential for market destabilisation—including insurer withdrawal and higher premiums; while a few suggested selective, aggregate-limited cover might be feasible, the consensus was that a blanket return to full civil liability is not currently practical or desirable.
The RICS decided on updating the Minimum Policy Wording with a comprehensive definition and the definition of fire safety will include "internal fire safety components of internal walls". This aligns with market practices and addresses emerging fire safety risks for clarity, reduce or remove uncertainty and promotes consistency in coverage and claims management.
The RICS has decided not to return to full civil liability coverage for five storeys and above at present but has stated this is a longer-term objective.
Any one claim
Traditionally, the minimum terms needed to be "any one claim" coverage. However, due to the COVID-19 global pandemic, in 2020, in an effort to manage uncertainty in the market, the RICS temporarily allowed insurers to offer aggregate policies which could be reinstated. We previously wrote about this here. Now that market conditions have improved, and a marked increase in insurers (to pre-pandemic levels), the RICS proposed removing the aggregate cover endorsement and returning to the "any one claim" model. Whilst this may lead to a rise in premiums, excess layer cover is frequently needed with the aggregate model and so this would limit the increase. Although a number of RICS-regulated firms backed the move, it was ultimately decided it would be too disruptive and this outweighed any potential benefits.
Cancellation of PII policies by insurers
Whilst rare, under the RICS Minimum Policy Wording, insurers can cancel a policy for non-payment of the premium. Lacking a clear, standardised process meant inconsistent practices, in some cases cover was confirmed for an extended period when, in fact, no premium had been paid. This was deemed a clear risk of there being no cover in place. The RICS therefore suggested a widely used market clause (LSW3001), with a defined period for payment of premiums (60 days of policy inception, with a 30-day notice period of cancellation to the broker). Further, provision was made for cover to continue in the event the premium remain unpaid following the 30 days; and that cover would still remain if notification of a claim was made before termination provided the premium was paid in full. RICS members were in support of this proposal,
The RICS has therefore incorporated a cancellation clause into the Minimum Policy Wording using a slightly modified version of clause LSW3001 so that there will be:
- A 30-day premium payment period from policy inception; and
- A 30-day cancellation notice – with a further 30 days cancellation period notice issued to the broker (to run consecutively for a total of 60 days); as well as
- Claims protection so that the policy pays out if a claim is notified before termination (and the premium is subsequently paid in full).
Cancellation of PII policies by RICS members
Before now, the Minimum Policy Wording had addressed cancellation by insurers (as set out above) but not included cancellation of PII policies by RICS members. To provide clarity and for fairness and consistency, the RICS proposed a new provision to bring it in line with insurer-cancellations. This incorporated:
- A 30-day written notice period (to insurer); and
- On cancellation the unspent part of the premium would be refunded, or if a claim notified in a just an equitable portion.
Most respondents supported this change with varying views on cancellation provisions, including refund of premiums and the cancellation period. However, on balance, the RICS decided to proceed with a clear amendment to the Minimum Policy Wording and PII requirements. A new clause is therefore inserted into the Minimum Policy Wording so that RICS regulated firms can cancel PII cover with 30 days' written notice but there will be particular conditions eg material change in risk; firm absorbed in another firm; downgraded credit rating (to below BBB/B+); or mutual agreement. This does not detract from having adequate insurance which must then be obtained.
Notifying RICS of policy cancellation
The five-day notice period insurers should have given to RICS was frequently not met. This created a risk as the RICS did not have time to intervene before sudden loss of cover. The RICS therefore proposed a 30-day extension in the Minimum Policy Wording and permitting notification by brokers or agents. Hopefully, this will lead to a reduction in risk of firms running without cover. Most agreed as this offers a more practical solution and ultimately end in better protection for clients and the public. There was support for delegation but mis-communication was a concern. After consideration, the RICS has proceeded with this change albeit through the Listed Insurer Agreement not the Minimum Policy Wording to address concerns around client confidentiality. In light of the concerns around mis-communication, there is no formal delegation wording although insurers may do this, where appropriate.
Key takeaway
These amendments took effect on 1 July 2025.
The RICS PII requirements can be found here.
The RICS Minimum Policy Wording can be found here.
RICS members/insurers/brokers should ensure they have familiarised themselves with these latest changes and understand the scope, limitations and definitions outlined above.
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