We wanted to make you aware of recent developments that are likely to impact on a number of new professional indemnity insurance policies commencing on or after the 1st January 2021. It is important to stress that the developments that we are advising upon today, will not impact any policy that is currently in place.


In late 2019, Lloyds of London via affiliate members created a working group of committee members to consider how cyber risks are treated in the Professional Indemnity (PI) market along with the degree of overlap or gaps in respect of traditional, standalone cyber insurance products.

The key driver for this initiative is the ongoing regulatory scrutiny by the Prudential Regulation Authority (PRA) into cyber risks provided in the non-standalone cyber market and their requirement that insurers suitably identify, assess and manage their cyber liabilities.

Underpinning these principles are reservations that insurers in non-standalone cyber classes of business, are not affirmative in their policy approach to cyber risk. As such, insurers do not always sufficiently consider the potential for systemic cyber risk exposures, which can potentially lead to both coverage and claim reporting issues.

The PRA's work, the growing size and sophistication of the standalone cyber market but also the increased scope of cyber risks, has led to a re-evaluation of cyber specific risks in most non-standalone markets.

In response to this, Lloyd's published two Market Bulletins requiring Managing Agents to be expressive in their policy approach to cyber risks (in July 2019) and their follow up correspondence (in January 2020) identified that professional indemnity risks should have 'compliant' policy provisions in place by 1 January 2021.


As a result of these requests, two leading insurance market bodies, the London Market Association (LMA) and International Underwriting Association (IUA) drafted clauses that the vast majority of insurers have advised that they will be applying to Professional Indemnity Insurance policies that commence on or after 1st January 2021.

What does this mean for you?

There are some important points to make you aware of:

  • The SRA Minimum Terms and Conditions (MTC) policy remains unaffected currently. Therefore the compulsory 2M or 3M policy (dependent upon company status) will see no changes moving forward. Please do note however that insurers are in liaison with the SRA to apply the clause to the MTC policy, as we understand it, the SRA are unlikely to agree to this.
  • Excess layer policies that are purchased above the compulsory limits set by the SRA, will be impacted and a clauses is likely to be applied, at this stage, however the majority of active insurers are reviewing its implementation.
  • Any excess layer policy currently in place currently will not be impacted, as above the changes in policy coverage are for new policies commencing with effect from 1st January 2021.

What do you need to do?

At this moment in time, you do not need to do anything. We continue to liaise with insurers and we will continue to keep you abreast of developments along with highlighting to you any potential impact that this may have on upcoming renewals.

In the coming weeks, we expect to have a clearer picture as to the extent of what clauses will apply and how, at which point we can then identify the potential impact to you. When we have this information, we will look to source solutions to address any possible gaps in coverage as a result of these forthcoming changes so that you are adequately protected via an alternative risk transfer mechanism or product.

At this stage, we felt it important to share with you an accurate overview of the matter. Should you wish to discuss any aspect further, please do not hesitate to contact your Lockton account executive.  We will be in touch in due course as more information is made available.