Professional Risk Indemnity Insurance

Professional risk indemnity insurance is a standard component of the economic and financial standing assessment in European public procurement. Contracting authorities require minimum insurance levels to ensure that, if a supplier causes harm during contract performance, there is a financial backstop sufficient to cover the resulting liability without requiring the authority itself to absorb the loss.

What is Professional Risk Indemnity Insurance?

Article 58(3) of Directive 2014/24/EU permits contracting authorities to require suppliers to demonstrate that they hold an appropriate level of professional indemnity insurance as a condition of participation. In practice, procurement documents typically specify minimum coverage amounts for one or more of the following policies:

Professional indemnity insurance (PII). Also called professional liability or errors and omissions insurance, this covers claims arising from negligent professional advice, design errors, or failures in professional services. It is particularly relevant for consulting, engineering, legal, IT, and advisory contracts.

Public liability insurance. Covers claims from third parties (including members of the public) for bodily injury or property damage caused by the supplier's activities during contract performance. This is relevant for any contract involving on-site work or direct public contact.

Employer's liability insurance. Mandatory in most European jurisdictions for any business with employees, this covers claims by employees who are injured or made ill as a result of their work.

Product liability insurance. Relevant for supply contracts involving goods that could cause harm if defective.

The minimum levels required vary widely depending on the nature and value of the contract. A small advisory contract might require GBP 1 million professional indemnity cover; a large infrastructure or clinical services contract might require EUR 10 million or more. Buyers are expected to set requirements proportionate to the contract risk, and disproportionate insurance requirements can be challenged.

At the bid stage, suppliers self-certify that they hold the required insurance, typically through the selection questionnaire (SQ) or PQQ. The winning bidder is then required to produce actual insurance certificates before the contract is signed.

Why Professional Risk Indemnity Insurance Matters for Bidders

Insurance requirements create a cost and eligibility filter that many smaller suppliers underestimate. A supplier that holds standard commercial insurance may find that its policy limits are below the minimum required for a specific contract. Obtaining higher cover can involve significant additional premium cost, and some policies are hard to obtain for certain risk categories.

Before committing to a bid, verify: the specific policies required and their minimum levels; whether your current policies meet the requirement in terms of both limit and scope; and whether you need to arrange additional or topped-up cover before the bid is submitted. Insurers can sometimes issue a "to be confirmed" letter confirming that enhanced cover would be available if the contract is won, which some buyers accept at the bid stage.

Example

A Danish architecture practice bids for a framework agreement to design public healthcare buildings. The selection criteria require professional indemnity insurance of at least EUR 5 million per claim. The practice currently holds EUR 2 million cover, standard for its size. Before submitting its bid, it contacts its insurer, which confirms in writing that cover can be extended to EUR 5 million from the contract start date subject to premium adjustment. The practice includes this confirmation in its selection questionnaire (SQ) submission, and the authority accepts it as evidence of compliance.

Frequently Asked Questions

Must insurance be in place at the time of bidding, or only at contract award?

Many buyers require evidence that insurance is in place at the time of bidding. Others accept a commitment from an insurer that the required level of cover will be arranged before contract start. The procurement documents will specify which approach applies. If ambiguous, ask through the official Q and A channel.

Can a consortium member provide insurance coverage for the whole consortium?

Yes, in principle. Where one consortium member holds the required insurance and the consortium is jointly and severally liable, the authority may accept that member's coverage for the consortium. Some buyers require each member to hold coverage independently. Check the specific requirement in the procurement documents.

Is professional indemnity insurance the same as public liability insurance?

No. Professional indemnity covers losses arising from negligent professional services or advice. Public liability covers physical harm or property damage to third parties caused by the supplier's activities. Many public contracts require both, and the required levels may differ.