Lockton spotlights PI cover as AFSL extends to crypto

Regulatory Guide 126 (RG 126) states that PI policies should respond to retail client losses arising from Chapter 7 breaches, including losses caused by negligent, fraudulent, or dishonest conduct by the licensee or its representatives. The guide also indicates that exclusions which significantly narrow this minimum scope may lead to concerns about adequacy. In addition, RG 126 expects cover for representatives, at least one automatic reinstatement in most cases, retroactive continuity where there is an existing policy history, defence costs structured in a way that is consistent with the risk profile, and cover for AFCA awards. Lockton notes that, for DAP and TCP operators transitioning into the AFSL environment, PI adequacy is likely to be assessed in the context of AFSL authorisations, client mix, and service offerings, rather than against generic market benchmarks for PI limits and wordings.