The regulatory requirement for PII
As the statutory regulator for the architects’ profession, ARB ensures only those who are suitably competent are allowed to practise as architects. We do this by approving the qualifications required to join the Register of Architects. We set the standards of conduct and practice the profession must meet and take action when any architect falls below the required standards of conduct or competence.
ARB expects all architects on the Register to have sufficient professional indemnity insurance (PII) to meet their liabilities. PII protection is essential to provide reassurance for architects, their clients, and the people who will live in and use their buildings in the future. PII helps to ensure that if a construction project goes wrong, those parties who suffer loss can make a claim to provide for the remedies and be adequately compensated. The requirement to have adequate and appropriate indemnity insurance is something most UK professional regulators require of their registrants, from solicitors and accountants, to doctors and pharmacists.
For the last 20 years architects have been expected to hold adequate and appropriate professional indemnity insurance cover under the Architects Code of Conduct and Practice. Details of what PII is likely to be deemed ‘adequate and appropriate’ have been set out in underpinning guidance as to how compliance with the Code can be achieved.
Challenges in the insurance market
The insurance market has recently experienced significant difficulties that has led to widespread restrictions on the type of cover that is generally available (see here and here for examples of research into the difficulties). This has been because of global economic factors and a reappraisal of risk in the construction sector following the discovery of widespread unsafe cladding on buildings.
The insurance market is complex. There are many different insurers who have differing risk appetites and commercial interests, who insure a profession which carries a wide range of architectural projects, each with insurable risks. Because of that it is not a straightforward exercise to establish what cover is available, to whom, and at what cost.
It has however become increasingly apparent that for some architects, the existing ARB PII guidance is no longer always achievable. The purpose of this consultation is to seek evidence on what requirements should be made of architects in order to provide sufficient public protection.
After carrying out our own research and engaging with the insurance market and professional bodies, we have developed new draft guidance on the insurance arrangements architects are expected to have in place to remain compliant with the Code of Conduct.
In our proposals for the updated guidance:
- It remains the case that architects should have adequate insurance before undertaking any new work, but coverage for certain types of claim – including fire-safety and cladding – can now be held in the aggregate, and limited to direct loss.
- It will no longer be a matter of misconduct for architects who, despite making reasonable efforts are unable to acquire retrospective insurance to cover historic liabilities, through no fault of their own.
- The minimum level of cover below which no architect should accept remains at £250,000 for each and every claim. The rationale for this figure was based on the potential financial impact of even the smallest project being subject to a claim, and that a lower level of cover would result in only negligible savings on the premium. It is a figure that has been in place for over 15 years.
- Because PII is held on a claims-made basis, insurance must be maintained annually to cover any historic liabilities. When practice has ceased, the continued insurance is known as run-off cover. Under the current and proposed guidance, run-off cover should be maintained for six years (or five years if practising in Scotland). This is to coincide with the statutory time limits on a claim for negligence being made in a particular jurisdiction. There are proposals within the Building Safety Bill to extend the period of liability for some claims to 30 years. We believe that requiring architects to maintain run-off cover for a period longer than six years would be disproportionate to the risks involved.
We are now asking for views on the draft guidance before it is finalised and comes into force. We expect this to be in the autumn of 2022. Views raised will be used to consider whether the changes to our guidance will help architects access insurance and continue to practice, and that consumers and the public remain protected.
We have changed the guidance to allow cover in respect of fire-safety and cladding claims to be held on an aggregate basis, and limited to direct loss.
|The minimum level of cover below which no architect should accept remains at £250,000 for each and every claim. Is that level of cover still appropriate to cover the lowest risk architectural practices?|
|The Building Safety Act extends the period of liability for some claims to 30 years. We believe that requiring architects to maintain run-off cover for a period longer than six years would be disproportionate to the risks involved. Do you agree that the minimum amount of run-off cover should remain at six years? If not, what should the minimum amount of run-off period be?|
|ARB’s guidance states that it is unacceptable for architects to carry out any work for which they are uninsured. Given the changes to the availability of insurance, what impact does ARB’s requirement have on your practice? If there are exclusions on your policy, please outline whether you are able to continue to practice and the nature and/or extent of the modifications you have made to your practice in order to be compliant with your insurance.|
|Do you have any other suggestions as to how the draft guidance could be improved? Where possible, please refer to the paragraph number of the text in the draft guidance.|