Yes – insurance brokers need insurance, and the FCA says so. Firms carrying on insurance distribution must hold professional indemnity cover meeting the minimums in MIPRU 3 of the FCA Handbook, and the exposures are real: placement errors, cover gaps discovered at claim time, and administrative failures that leave clients uninsured. This guide covers the requirements and the market for broking firms' own protection.
What insurance does an insurance broker need?
Professional indemnity – FCA-mandated. MIPRU 3's minimums for insurance distribution: €1,300,380 per single claim, and in aggregate the higher of €1,924,560 or 10% of annual income (capped at £30m). Excesses are regulated too – no more than £2,500 or 1.5% of annual income, doubled if the firm holds client money; higher excesses require additional capital under prescribed tables. Cover must be continuous since authorisation. The characteristic claims: failure to arrange cover as instructed, inadequate limits or missed endorsements surfacing at claim time, and misdescription of policy terms.
Client money dimensions. Firms holding client money face the doubled-excess rules and should align PII with their CASS arrangements; fidelity/crime cover for staff dishonesty belongs in the conversation.
Also: cyber (client data plus premium-payment fraud), D&O for directors of regulated firms, office cover, employers' liability, and run-off on exit – six years is the standard expectation for claims-made professional cover, and errors surface long after placement.
How much does it cost?
Individually rated on brokerage income, class mix (construction, financial lines and high-net-worth books rate differently from personal lines), wholesale/MGA activities, client-money holding and claims record. Small provincial brokers typically pay from around £1,000 upward annually; minimum premiums apply; and firms with binding authorities or London-market activity rate as a different animal. Present complaints data and E&O history cleanly – this market reads files closely.
Comparison of providers
A specialist market, largely broker-to-broker:
| Provider | Type | Notable features |
|---|---|---|
| Lockton | Global broker | Publishes the clearest public guidance on MIPRU compliance for brokers; dedicated brokers'-own-PI practice |
| Howden | Specialist broker | Major professional-lines house (£160m+ PI premium placed annually) with a brokers' E&O proposition |
| BIBA-arranged facilities | Trade-body routes | The British Insurance Brokers' Association maintains member scheme arrangements – a sensible first call for members |
| Specialist E&O underwriters (via brokers) | Markets | Lloyd's and company markets writing intermediaries' E&O |
Reviews and expert ratings
Not a consumer-review market. Which?/Fairer Finance: not rated. Quality gates: MIPRU-compliant limits/excess structure, continuity, and an underwriter comfortable with your class mix and any binding authorities.
Key takeaway
You advise clients on exactly this; apply your own advice. Compliance minimums first (euro limits, regulated excess, continuity), then real-world limits against your largest placements – a €1.3m minimum is small beside an eight-figure placement error. Declare binders, wholesale chains and client-money arrangements precisely, and buy your run-off before the sale or wind-down, not after.
Sources
- handbook.fca.org.uk/handbook/MIPRU/3/ (limits, excess and capital tables)
- global.lockton.com (MIPRU figures and guidance)
- fca.org.uk/publication/other/fs027-buying-professional-indemnity-insurance.pdf
- howdengroup.com; biba.org.uk