SRA Minimum Terms for Professional Indemnity Insurance Explained

Professional indemnity insurance is compulsory for every SRA-authorised firm, but the SRA doesn't simply require "adequate insurance" and leave it there — it sets out detailed Minimum Terms and Conditions that every qualifying policy must meet, creating a regulatory floor that exists specifically to protect clients rather than the firm buying the cover.

The minimum cover limits

The required minimum level of cover depends on how a firm is structured. LLPs, incorporated practices, and recognised or licensed bodies must carry at least £3 million of cover for any one claim. Sole practitioners and traditional partnerships without separate legal personality — where partners remain personally liable for the firm's debts — need a minimum of £2 million. This distinction also matters for firms considering conversion to an Alternative Business Structure, since the same structural logic applies regardless of ownership type. The higher limit for incorporated structures reflects the fact that limited liability shields individual owners from personal liability beyond the company or LLP itself, so the SRA requires more compulsory cover to compensate for the reduced recourse a claimant would otherwise have.

No cap on defence costs

Regardless of which limit applies, the Minimum Terms and Conditions require that there be no monetary limit on cover for defence costs. This matters because legal costs of defending a professional negligence claim can themselves be substantial, and a policy that capped defence costs within the same limit as damages could leave a firm underinsured even where the eventual claim itself was modest.

Run-off cover

When a firm closes, or stops practising in a way that requires SRA authorisation, it doesn't simply stop needing insurance — claims relating to past work can still emerge years later. The Minimum Terms require six years of run-off cover, ensuring former clients retain protection even after the firm itself has ceased to exist. This is a significant, sometimes underappreciated cost of winding down a firm, and one that needs to be planned for rather than discovered at the point of closure. Firms should also be alert to how mergers, closures and successor practice arrangements interact with run-off obligations, since responsibility for historic claims can sometimes transfer to a successor firm rather than requiring the original firm to maintain standalone run-off cover.

Why minimum terms exist at all

The Minimum Terms and Conditions exist to guarantee a consistent baseline of consumer protection regardless of which firm a client instructs or which insurer that firm uses. Because the terms are standardised across the market, a claimant doesn't need to investigate the specific policy wording of the firm they're suing to know a robust minimum level of protection exists — though firms themselves are still expected to assess whether the regulatory minimum is actually adequate for their own risk profile, not simply treat it as a target.

Adequate and appropriate cover versus the regulatory minimum

The SRA is explicit that meeting the Minimum Terms doesn't automatically mean a firm has "adequate and appropriate" cover for its own circumstances. A firm handling high-value commercial transactions or complex litigation may face realistic single-claim exposures well above the regulatory floor, and is expected to size its actual cover to its real risk rather than simply purchasing the legal minimum and considering the question closed.

How this connects to client money protections

Minimum Terms cover sit alongside, rather than replace, the separate protections built into the SRA Accounts Rules governing how client money is held and controlled. Together, mandatory insurance and strict client money rules form two distinct but complementary layers of client protection.

Run-off cover and what happens when a firm closes

One of the more significant protections the Minimum Terms create is run-off cover: when a solicitors' firm closes, merges, or otherwise stops practising, its insurer must provide six years of automatic run-off cover on the same minimum terms, at no extra premium charged to the firm's principals beyond what the policy already requires. This matters because negligence claims often surface years after the underlying work was done — a defective will or a badly drafted lease might not cause a problem until long after the firm that handled it has shut down — so run-off cover ensures a client still has somewhere to claim even if the firm they instructed no longer exists.

Frequently asked questions

Do all solicitors' firms need the same minimum level of PII cover? No — LLPs, incorporated practices, and licensed or recognised bodies need at least £3 million; sole practitioners and traditional partnerships need at least £2 million.

Is there a limit on defence costs cover under the Minimum Terms? No — the Minimum Terms and Conditions require unlimited cover for defence costs, separate from the damages limit.

How long does run-off cover need to last after a firm closes? Six years, to protect clients from claims relating to work carried out before the firm ceased practising.

Does meeting the SRA minimum mean a firm has enough cover? Not necessarily — the minimum is a regulatory floor, and firms with higher-value or higher-risk work are expected to assess whether they need cover beyond that floor.