ASIC began collecting annual professional indemnity insurance data from AFS licensees in 2025 through financial statements lodged with the regulator. Form FS70, submitted through the ASIC Regulatory Portal, asks licensees to report the PI insurance they hold, the policy excess and whether a claim has been paid.
ASIC analysed submissions from licensees authorised to provide personal advice to retail clients on Tier 1 financial products and with at least one adviser on the Financial Advisers Register. It identified 10 licensees that had reported holding less than $2 million of PI insurance.
Nine of those licensees had sufficient evidence of cover but had understated it in their FS70 lodgements. They provided evidence and resubmitted corrected information. The remaining licensee had misunderstood its obligations and held inadequate insurance. Following ASIC’s intervention, that licensee lodged a reportable situation and began winding up by applying to cancel its AFS licence.
The surveillance cohort was specific to financial advice. It was not a finding about all AFS licensees or commercial insurance brokers. The control lesson is broader: licensees should test both the substance of applicable compensation arrangements and the accuracy of regulatory reporting.
Section 912B of the Corporations Act 2001 applies where an AFS licensee provides financial services to persons as retail clients. It requires arrangements for compensating those clients for loss or damage caused by breaches of relevant Chapter 7 obligations by the licensee or its representatives.
For a business and commercial insurance brokerage, the word business or commercial does not settle the statutory classification. The licensee should assess the financial product, the service and the client’s status under the Corporations Act and Regulations. If the business only provides the relevant financial services to wholesale clients, section 912B may not be the source of the PI obligation, although licence conditions, contracts, insurer requirements, professional standards or prudent risk management may still require cover.
Where section 912B applies, the Corporations Regulations generally require adequate PI insurance unless an exemption applies or ASIC has approved alternative arrangements.
Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees explains ASIC’s administration of the retail-client compensation requirements. It is regulatory guidance, not a substitute for the Act, Regulations or policy-specific advice.
For an AFS licensee with total revenue of $2 million or less from financial services provided to retail clients, ASIC’s minimum benchmark is a PI policy limit of at least $2 million for any one claim and $2 million in the aggregate.
For a licensee above that revenue level, ASIC says minimum cover should be approximately equal to actual or expected revenue from financial services provided to retail clients, capped at $20 million. For this calculation, ASIC says revenue should include revenue received by authorised representatives from providing financial services to retail clients.
These figures are minimum benchmarks, not a complete adequacy test. A higher limit may be needed depending on potential liability, the nature and volume of services, client types, representatives, claims exposure, policy terms and the licensee’s financial resources. ASIC does not approve an individual licensee’s PI insurance arrangements, so the licensee remains responsible for assessing and documenting adequacy.
A schedule showing a $2 million limit does not, by itself, establish adequate cover. A practical review should test the policy wording, schedule and endorsements against the business’s actual activities and exposures.
ASIC’s findings show why an FS70 response should be treated as a controlled regulatory submission, not an administrative carry-forward exercise.
Before lodging the annual financial statements, the preparer and approver should work from the current policy schedule, wording and endorsements. At a minimum, they should verify:
Keep evidence supporting each response and record who prepared, checked and approved the submission. If the policy documents are unclear, obtain clarification before lodging rather than relying on an assumption or a figure copied from the previous year.
RG 126 says licensees should review their PI insurance or other compensation arrangements at least annually and after major changes to the business. Renewal is therefore a minimum review point, not the only one.
A fresh assessment may be needed when a licensee adds representatives, introduces new services or products, acquires a client book, changes its client profile, identifies weaknesses in compliance systems or experiences significant claims. Revenue growth can also change the minimum cover ASIC expects.
Accountability should be explicit. ASIC expects a senior officer or manager to be responsible for renewal, timely premium payment and continuing adequacy. Compliance, finance and the person managing insurance should have defined roles so that policy data and regulatory reporting are checked rather than assumed. Claims and circumstances must also be escalated promptly under the policy and the licensee’s incident processes.
Is $2 million of PI insurance always enough?
No. It is ASIC’s minimum benchmark for a licensee with relevant retail-client financial services revenue of $2 million or less, but the appropriate limit depends on the licensee’s circumstances and potential liability. Some businesses will need a higher limit.
Does an adequate limit make the whole policy adequate?
No. Adequacy also depends on matters such as scope, exclusions, persons covered, defence costs, reinstatement, the excess, AFCA awards, retroactive cover and available financial resources.
Does section 912B apply to every commercial client?
No. Section 912B is linked to financial services provided to persons as retail clients. A licensee should apply the statutory client-classification rules to the relevant product and service rather than rely only on labels such as commercial, business or small business.
How often should PI arrangements be reviewed?
ASIC expects a review at least annually and when there is a major business change. A licensee should also reconcile the PI information in each applicable FS70 submission to current source documents before lodging.
ASIC’s 2026 surveillance highlights two distinct risks: holding inadequate PI insurance where the compensation requirements apply, and reporting insurance information inaccurately.
AFS licensees should confirm the scope of their legal and licence obligations, test the substance of applicable cover against RG 126, reconcile FS70 responses to current policy documents and retain a clear assessment and approval trail. Insurance, legal and compliance advice may be needed because adequacy depends on the licensee’s services, client classification, risk profile, financial resources and policy terms.
ASIC, Financial advice update September 2026. Used for the FS70 reporting requirements, surveillance cohort, findings and regulatory response.
ASIC, Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees. Issued 21 November 2024. Used for the adequacy benchmarks, policy features, review triggers and governance expectations.
Federal Register of Legislation, Corporations Act 2001. Section 912B used for the statutory compensation-arrangements obligation.
Federal Register of Legislation, Corporations Regulations 2001. Regulation 7.6.02AAA used for the general requirement to hold adequate PI insurance, subject to applicable exceptions and alternative arrangements.