ICSA Professional Indemnity, Directors & Officers Insurance for Financial Institutions Magnus McGurk, Business Development Manager, SME Professional Lines

Background Allied World Assurance Company AM Best Rating ‘A’ Standard & Poor’s Rating ‘A’ Market Capitalisation: $2.4bn 16 offices Worldwide Over 700 employees

Objectives Overview of Professional Indemnity and Directors & Officers Insurance Cover provided Rating factors Trends and claims

Policy Basics Cover on a claims made basis Cover typically provided on an aggregate basis Excess applies to claims Worldwide cover available Annually renewable

Professional Indemnity Cover

Why the need for PI? A means of protecting professionals against mistakes they may make when providing a service in the course of their business. Claims can be brought in both contract and tort and therefore the lack of contractual obligations does not restrict the liability owed by professionals to their clients. PI insurance provides essential financial protection especially when considering that many professionals have unlimited liability due to the structure of their company/partnerships.

Operative Clause We will pay Loss as incurred by the Business or You in respect of any Claim made against the Business or You during the Period of Cover for a Professional Wrongful Act.

Definition Wrongful Act means: Any actual or alleged libel, slander, error, misstatement, misleading statement, misrepresentation, omission, neglect, breach of duty, breach of fiduciary duty, breach of trust, breach of warranty of authority or other act attempted or committed by You when acting or serving in such capacity.

What does it cover? Breach of duty Legal liability Legal costs Libel and slander

What does it cover? Loss of documents Dishonesty of employees Unintentional breach of confidence Infringement of copyright and intellectual property rights

Who does it cover? Partners, directors and members including past Such consultants and former consultants as are included when the Policy is taken out Retired partners, directors and members remaining as consultants Employees and former employees Self-employed persons acting on their behalf in the conduct of their professional business

What’s not covered? Bodily injury/property damage Products liability Contractual liability Insolvency/bankruptcy of insured Circumstances known at inception Fines and penalties Radioactive contamination, Seepage and pollution

Directors & Officers Cover

Why the need for D&O Insurance? A means of protecting directors and officers against personal liability and non-indemnifiable claims A limited company may have limited liability but as a director your liability is unlimited Provides balance sheet protection and affords defendants the benefit of specialist legal support Directors can face allegations, unfounded or otherwise which can be extremely expensive to defend.

Operative Clause We will pay Loss as incurred by You or on your behalf in respect of any Claim first made against You during the Period of Cover for a Wrongful Act. If the Business pays Loss on Your behalf in respect of any Claim first made against You for a Wrongful Act then We will pay such Loss on behalf of the Business instead.

Definition Wrongful Act means Any actual or alleged libel, slander, error, misstatement, misleading statement, misrepresentation, omission, neglect, breach of duty, breach of fiduciary duty, breach of trust, breach of warranty of authority or other act attempted or committed by You when acting or serving in such capacity.

What does it cover? Loss resulting from covered claims against Insured person alleging Wrongful act, error or omission Misstatement Neglect Breach of Duty

What about formal investigations? Cover is provided for the legal fees and professional charges an insured person personally incurs in their representation at an investigative inquiry into their conduct.

Who does it cover? Past, present and future -Directors, officers and company secretaries of the policyholder or one of its subsidiaries

Who does it cover? Employees of the policyholder and its subsidiaries, if they are: - Co-defendants in a covered claim - Named in an employment claim - Acting in a managerial capacity - An approved person performing particular Controlled function (as specified by FSA or equivalent)

Underwriting Criteria Nature of activities Experience/qualifications of partners/directors Fee income/revenue Contract sizes and client base Claims experience

Underwriting Submission Proposal form CV’s of senior personnel Financial Statements Any information on performance Any supporting literature/brochures Internet Address Sample Contracts/Letters of engagement

Claims Notification A claim is generally notifiable under a PI and D&O policy when the insured first becomes aware of circumstances that could lead to a claim - this could be anything from a verbal criticism to receipt of a statement of claim.

The Changing Environment Economic Uncertainty Increased regulation Increased accountability of regulators Greater awareness on the part of third parties of the duties and responsibilities of a Director Shareholders and other third parties are becoming more aware of their rights Lawyers are now able to act on behalf of plaintiffs on a no win no fee basis.

Increased claims activity ‘Fat Finger’ Misadministration Wrongful Advice Failure to comply with prospectus Change in strategy

Increased claims activity Outside Directorship Liability Misappropriation of trade secrets Trading whilst insolvent Regulatory Investigation

QUESTIONS?