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