Why the SRA MTC Matters for Every Solicitor
Every SRA-regulated law firm in England and Wales must hold professional indemnity insurance (PII) that meets the SRA Minimum Terms and Conditions (MTC). This is not optional. The MTC is a regulatory requirement that protects clients, the firm, and the wider public interest.
If your firm's PII policy does not comply with the SRA MTC, you are in breach of the SRA Principles and the SRA Indemnity Insurance Rules. The consequences can include regulatory action, fines, and in serious cases, closure of the practice.
This guide explains the core requirements of the SRA MTC, including the £2m minimum cover, qualifying insurer rules, and what happens when a claim arises. It is written for COFAs, equity partners, and compliance officers who need to understand the practical implications of the MTC for their firm.
What Are the SRA Minimum Terms and Conditions?
The SRA Minimum Terms and Conditions (often called the MTC) are the mandatory provisions that every PII policy for an SRA-regulated firm must contain. They are set out in the SRA Indemnity Insurance Rules 2014 (as amended).
The MTC covers key areas including the scope of cover, minimum limits of indemnity, run-off cover requirements, and the circumstances under which an insurer can avoid or reduce liability. Any policy that does not include these terms is not compliant with SRA regulations.
It is important to note that the MTC applies to the firm's primary layer of PII cover. Excess layers (top-up policies) do not need to follow the MTC, but the primary layer must do so without exception.
Minimum Cover: £2m for Most Firms, £3m for Sole Practitioners
The MTC requires a minimum limit of indemnity of £2m per claim and in the aggregate for firms with two or more principals. For sole practitioners and sole practice companies, the minimum limit is £3m per claim and in the aggregate.
These figures apply to claims made during the policy period. The limit applies to each claim, not to the total across multiple claims in a year, unless the policy is written on an aggregate basis (which is standard for most firms).
Many firms choose to purchase cover above these minimums, particularly those handling high-value commercial litigation, conveyancing, or specialist work. The MTC sets the floor, not the ceiling.
Qualifying Insurer Requirement
The MTC requires that the PII policy be issued by a qualifying insurer. A qualifying insurer is an insurer that meets specific criteria set by the SRA, including financial strength ratings and regulatory status.
The SRA publishes a list of qualifying insurers on its website. Firms must check that their insurer is on this list at the time the policy is taken out and throughout the policy period. If an insurer ceases to be a qualifying insurer mid-term, the firm must notify the SRA and may need to find alternative cover.
Using a non-qualifying insurer is a breach of the SRA Indemnity Insurance Rules. It can also create problems if a claim arises, because the policy may not be recognised as compliant by the SRA or the Solicitors Indemnity Fund (SIF).
Run-Off Cover: What Happens When a Firm Closes
One of the most important features of the MTC is the requirement for run-off cover. When a firm ceases to practise (whether through retirement, dissolution, or sale), it must maintain PII cover for at least six years after closure. This is known as run-off cover.
The MTC requires that the run-off cover be on the same terms as the original policy, including the same limit of indemnity. The premium for run-off cover is typically a multiple of the last annual premium, often around 1.5 to 2.5 times the final year's premium.
Firms that sell their practice to another firm may be able to transfer the run-off obligation to the buyer, but this must be agreed in writing and the buyer must have adequate cover in place. The SRA takes a strict view on this, so legal advice is essential.
Key Provisions of the MTC Every COFA Should Know
The MTC contains several provisions that directly affect how claims are handled and what the insurer can and cannot do. Here are the most important ones for COFAs and partners.
No Avoidance for Non-Disclosure
Under the MTC, an insurer cannot avoid a policy for non-disclosure or misrepresentation by the firm, except in cases of fraud. This is a significant protection for firms. It means that even if the firm made an innocent error in its proposal form, the policy remains in force and claims are covered.
However, this protection does not apply if the non-disclosure was fraudulent. If the firm deliberately concealed information, the insurer can avoid the policy. The burden of proof is on the insurer to show fraud.
Waiver of Subrogation Rights
The MTC includes a waiver of the insurer's subrogation rights against principals, employees, and former principals of the firm. This means the insurer cannot pursue a claim against a partner or employee to recover amounts paid out on a claim, unless the loss was caused by fraud or dishonesty.
This provision is crucial for protecting individual solicitors from personal liability when the firm's PII pays out. Without it, an insurer could sue a negligent partner to recover the claim amount.
Claims Made Basis
All PII policies under the MTC are written on a claims-made basis. This means the policy covers claims that are first made against the firm during the policy period, regardless of when the alleged act or omission occurred.
This has important implications for run-off cover. If a claim is made after the firm has closed but within the run-off period, the run-off policy responds. If the claim is made after the run-off period expires, there is no cover, and the firm's former principals may face personal liability.
How the MTC Affects Your Firm's Premium
The MTC does not set premium levels. Premiums are determined by the market and vary significantly based on the firm's size, areas of practice, claims history, and risk profile. However, the MTC does influence premium levels indirectly.
Because the MTC requires certain minimum cover levels and prohibits certain exclusions, insurers price their policies to reflect the mandatory cover they must provide. Firms with higher-risk practices (such as conveyancing or litigation) will typically pay more than those with lower-risk work (such as corporate or commercial advice).
The SRA also requires firms to disclose their PII premium in their annual report and accounts. This transparency helps the SRA monitor market conditions and identify firms that may be under-insured or paying unusually high premiums.
Common Compliance Mistakes with the MTC
Many firms inadvertently breach the MTC requirements. Here are the most common mistakes we see in practice.
Failing to Check the Qualifying Insurer List
Some firms assume that any well-known insurer is a qualifying insurer. This is not always the case. The SRA list changes periodically, and some insurers that were on the list may have been removed. Always check the current list before renewing or purchasing a new policy.
Not Understanding Run-Off Obligations
Partners who retire or leave a firm often assume that their personal liability ends when they leave. This is incorrect. Under the MTC, former principals remain liable for claims arising from work done while they were at the firm, unless the run-off cover is properly arranged.
If a firm dissolves without arranging run-off cover, each former principal may be personally liable for claims. This can be financially devastating, especially for retired solicitors living on a pension.
Assuming Excess Cover Follows the MTC
Excess layers of PII (policies that sit above the primary layer) do not need to follow the MTC. However, firms often assume that their entire insurance programme is MTC-compliant. This is not correct. Only the primary layer must comply.
If a claim exceeds the primary layer limit, the excess layer may have different terms, exclusions, or conditions. Firms should review their excess policies carefully and ensure they understand the gaps in cover.
What Happens If Your Firm Breaches the MTC?
Breaching the MTC is a serious regulatory matter. The SRA can take enforcement action, which may include a fine, a rebuke, or in extreme cases, closure of the firm. The SRA also has the power to intervene in a practice if it believes clients are at risk.
In addition to regulatory consequences, a breach can have financial implications. If a claim arises and the policy is not MTC-compliant, the insurer may refuse to pay out. The firm's principals would then be personally liable for the claim amount, which could run into millions of pounds.
COFAs have a specific duty under the SRA Accounts Rules to ensure that the firm's PII arrangements comply with the MTC. If a COFA fails in this duty, they may face personal regulatory action.
Practical Steps for COFAs and Partners
Here are the key actions every COFA and partner should take to ensure MTC compliance.
- Check the qualifying insurer list annually. Verify that your insurer is on the SRA's list at renewal and throughout the policy period.
- Review your policy wording. Ensure it includes all mandatory MTC provisions, particularly the run-off cover, non-avoidance clause, and waiver of subrogation.
- Understand your run-off obligations. If you are planning to retire or leave the firm, discuss run-off cover with your insurer and legal adviser well in advance.
- Keep records of your PII arrangements. The SRA may ask to see your policy documents during a compliance visit. Maintain a file with the policy schedule, certificate, and any correspondence with the insurer.
- Seek specialist advice. PII is a complex area. Work with a broker who specialises in solicitor PII and understands the MTC requirements.
For more detailed guidance on PII compliance, see our guide to professional indemnity tax treatment and our COFA fundamentals guide.
How a Specialist Accountant Can Help
While the MTC is an insurance matter, it has significant financial and accounting implications for your firm. Your accountant should understand how PII premiums affect your profit and loss account, how run-off costs impact partner drawings, and what disclosures are required in your annual accounts.
At Accounts for Lawyers, we specialise in law firm accounting and compliance. We work with COFAs and partners to ensure their PII arrangements are compliant and cost-effective. We can also help you model the financial impact of run-off cover on your retirement or exit plans.
Contact us to discuss your firm's PII compliance or book a free firm health check to identify any gaps in your current arrangements.