Deciphering Deputy Bonds: Navigating Changes

Posted: 4th April 2024

A security bond must be purchased by a deputy, which acts as an insurance policy to guarantee the obligations of the deputy to the client. The security bond is intended to cover both negligence and breach of fiduciary responsibilities. In the event of a professional deputy, the bond is intended to pay out only enough to support the client whilst a full claim is made against the deputy’s professional indemnity insurance.

Obviously, in the case of a lay deputy, it will probably be the only potential vehicle that the client will have to claim against. With that in mind, the Court may well consider setting a higher amount to be secured by a lay deputy, than might be expected in a professional deputyship.

A fresh policy has to be taken out whenever a deputy changes, and a full year’s premium paid at the point of change.

On 1 April 2023 bond arrangements changed and there are now three providers, but only two of them are currently publishing their premium rates. These are Howdens, who charge 0.2% of the amount secured each year, for the duration of the deputyship, and Marsh. Marsh is cheaper, charging 0.11% of the amount secured as an annual premium. There is not believed to be any significant difference in the cover provided under the two different policies.

The final provider indicates that they will be able to offer a premium that is paid only for the first five years of the deputyship, but which will cover the entire duration of the deputyship. However, the new arrangements have been in place for nearly 12 months and there is no further word as to when their premium structure will be announced.

It therefore seems questionable as to whether or when a lump sum/shortened premium structure will become available. This is troubling for clients whose claims concluded during the few years immediately prior to 2023 when lump sum premiums were available, and therefore whose claims were valued on that basis.

It can be difficult at times to understand the principles that are applied when deciding how much to set as a sum to be secured, as there is a lack of consistency in the bond values that are set. This can make it challenging to predict what any particular bond level will be, however a recent review of our bond levels shows that there hasn’t been a specific change in the levels being set by the court with the majority of bonds continuing to be set between £100,000 to £300,000.

For further information or to get in touch with our Expert Witness team, contact us at [email protected].