Perceptions often need to be challenged and so I was pleased to read a recent article in The Herald highlighting the fluidity of the Third Sector and some moderate growth within it.
Too often, the charity and not-for-profit sector is portrayed as a slow-moving backwater, but figures from the Scottish Charity Register paint a different picture.
The register lists more than 25,000 Scottish charities and, during 2025, it welcomed 965 new charities to its ranks, while 875 left the market. An increase therefore of 90 organisations.
The ongoing pressure of rising costs and falling incomes will have forced some organisations to cease trading, but merger and acquisition activity is also a major driver of market exits, while some organisations have simply fulfilled their purpose.
Similarly, there are many reasons for new charities coming into existence. It may be that existing organisations have restructured or that a community has come together to complete a specific project or build a new facility.
Whatever the reason, there’s always coming and going within the sector. And this movement demands some consideration when it comes to insurance, if operators want to keep a lid on costs and ensure risks are properly covered.
Closing down considerations
Charity trustees are responsible for their organisation’s governance and operational controls. If these fail, then trustees may be held liable for resulting losses and this is why trustee liability insurance is vitally important.
The liability borne by trustees doesn’t cease to exist when the charity shuts its doors. And so even though the organisation may have stopped trading, it’s worth exploring run-off trustee liability cover. This is typically put in place for three years following closure, which is enough time for most issues to come to light.
Generally, this length of cover costs around 1.5 times the annual premium but without it, trustees will be left to foot the bill for any claim made against them. In addition to financial protection, the policy also affords trustees access to expert support if they do find themselves facing a claim.
In the event of shutting down, operators will be keen to recoup whatever money they can. When you cancel an insurance policy, many carriers will offer a partial refund on the policy paid. Depending on the size of the charity and the number of policies it has, these refunds could be substantial.
However, some insurers will charge administration fees, which will eat into any refunds. And in some cases, insurers will not offer any money back. If the policy was written on a minimum deposit premium basis, the carrier won’t provide a refund after the initial cancellation period has expired.
Some policies also have conditions that state there’s no refund for early cancellation if you’ve previously made a claim on the insurance. This approach isn’t universal, but neither is it unusual.
A broker can help cancel the covers and secure any refunds as well as ensuring the appropriate trustee liability run-off cover is arranged. At a time when there’s a lot to think about, this ensures you don’t lose out financially or leave trustees exposed to future claims.
Starting up considerations
Putting a robust insurance programme together is vital for any new charity. Some insurance is of course mandatory – if you have employees, or volunteers, then you need an employer’s liability policy. Similarly, the law requires any drivers to have motor insurance in place before getting behind the wheel. Their own personal policy is unlikely to provide the cover needed.
In addition, you’ll have to decide whether you need public liability cover and to assess what level of property insurance is appropriate. Business interruption and trustee liability covers are also important to consider as well as Cyber-insurance which is pretty much an imperative for any charity in this day and age.
A broker can help you assess exactly what cover you need and ensure you set the correct policy limits to meet your needs in the event of a claim. They’ll also ensure you don’t end up buying more cover than you need or duplicating it across different policies.
Making sure your insurance programme is properly aligned to your needs will make sure you don’t spend more than you should. And perhaps more importantly, if you need to make a claim, a broker will ensure you get the best possible settlement in the shortest possible time.
Every organisation is vulnerable following a loss, but for new charities it’s even more essential to get things back to normal as quickly as possible and to minimise any impact on those they support.
Last word
The ebb and flow of Third Sector organisations is essential to ensure the market continues to evolve and that it can meet the changing and hugely diverse needs of its services users.
The data from the Scottish Charity Register shows this evolution is happening at a meaningful scale. It also bears testament to a sector that’s more dynamic than many people realise and one that Keegan & Pennykid is proud to have supported for almost 60 years.
