What insurance should Asset Managers consider?

Asset managers should consider a variety of insurance coverages to protect their operations, assets, and clients effectively. Selecting the right mix of insurance coverages is essential to mitigate risks associated with their operations and protect their clients' investments. Here are the key types of insurance they should evaluate:

Professional Indemnity (PI) Insurance

This coverage protects asset managers against claims of negligence or breach of duty in their professional services. Given the fiduciary responsibilities asset managers hold, this insurance is crucial to safeguard against potential lawsuits from clients.

Directors and Officers (D&O) Insurance

D&O insurance protects the personal assets of directors and officers in the event they are sued for alleged wrongful acts while managing the company. This is particularly important in the financial sector, where regulatory scrutiny is high.

Cyber Liability Insurance

With the increasing reliance on technology and data management, cyber liability insurance is vital for protecting against data breaches and cyberattacks, which can lead to significant financial losses and reputational damage.

To this point, many might wonder how D&O and PI may differ. Directors and Officers (D&O) insurance and Professional Indemnity (PI) insurance are both essential types of liability coverage, but they serve distinct purposes and protect against different risks. We note below a few crucial differences

Coverage Scope

• D&O is designed to protect the personal assets of directors and officers from claims arising from their managerial decisions. It covers allegations of wrongful acts, such as breaches of fiduciary duty, negligence, or misstatements made in their official capacity. D&O insurance can also provide coverage for the company itself in certain circumstances, indemnifying it for losses incurred due to claims against its executives.

  
  

• PI, in contrast, protects professionals against claims of negligence, errors, or omissions in the provision of their services. It is particularly relevant for those in advisory roles, such as consultants, lawyers, and financial advisors, covering legal costs and damages related to professional mistakes that lead to client financial loss

Claimants

• D&O claims can be made by a variety of stakeholders, including shareholders, employees, and regulatory bodies, often related to corporate governance issues

  
  

• PI claims typically arise from clients or customers who allege that professional services provided were inadequate or resulted in financial harm

Exclusions

• D&O Insurance generally excludes coverage for professional services, meaning it does not cover claims arising from the provision of professional advice or services

  
  

• PI Insurance often includes exclusions for managerial activities, focusing solely on professional services rendered

We hope that the above tidbits are useful. Please feel free to contact us if you want to chat a little more about your program