Financial Solutions

Professional Liability Insurance

Professional Liability/Indemnity Insurance (PI) protects the company and individual persons who can be held legally liable for claims arising from wrongful acts committed during the performance of professional services on behalf/under the supervision of the company.

In most countries in the world, it is compulsory for professional service firms to take up some form of Professional Liability (or Professional Indemnity/Errors and Omissions) Insurance.

Many industry organisations, such as law societies or bar associations design, purchase and administer PI Insurance on behalf of their members. This compulsory insurance coverage is often purchased in domestic insurance markets that are under pressure from regulatory authorities to provide coverage in accordance with regulatory requirements, but which are often rather unattractive to insurers.

On top of compulsory insurance, and in response to the rapidly escalating number and size of PI claims that firms face, many are choosing today to purchase excess coverage on the international market.

This is not only the case for professional services firms. Most companies that provide and charge for advice to their customers and clients should purchase PI insurance. In Asia, it is common for medical institutions and professionals to purchase medical malpractice insurance. The value and frequency of claims have been increasing in tandem with a major shrinkage in capacity, severely impacting this sector.

Insurance markets worldwide have long been suffering from unprofitable books for PI Insurance, particularly across the financial and professional industries. In Asia, following an increased tendency for clients and customers to seek compensation for financial loss perceived to have been caused by their provision of advice, it is increasingly common for firms to find themselves underinsured and to face very difficult renewal negotiations with their insurers.

Financial institutions, increasingly cognisant of their professional liabilities are buying this product, particularly if they trade in more litigious environments. Regulatory stipulations are another reason for the increasing demand for this product.

What is covered?
The insurer indemnifies the insured for the latter's legal liability for damages plus costs, charges and expenses, as a consequence of a claim made against an insured, and where the claim is based on a wrongful act committed by an insured or other person for whom the insured is legally responsible. Wrongful acts are usually defined as negligent acts, errors and omissions or breaches of professional duty.

What is excluded?

• Bodily injuries/property damages
• Dishonesty, final adjudication
• Fines and penalties, multiple damages
• Uninsurable matters

When does the coverage apply?
International insurance markets require Professional Liability insurance to be triggered by claims made against the insured during the policy period based on a wrongful act committed at any time, provided that such claims are reported within the agreed reporting provisions in the policy. The coverage does not apply to claims/circumstances that could reasonably lead to claims, which the insured had knowledge of or had reported to another insurer or if litigation had commenced prior to the first inception date of the policy.

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