Insurance for the Financial Services Industry

Business Insurance for Asset Management Firms can be challenging and complex, especially for startups and smaller firms. Who do you go to? Who can you trust? What insurance protection do you need? Whether you’re a Registered Investment Advisor, Hedge Fund, Private Equity Firm, Venture Capital Firm, or Private Investment Fund, The Coyle Group can help you decipher the types of insurance you need and what options exist for you. Our approach to financial service firms is to give you the knowledge you need to make informed decisions around your insurance purchase and then leave no stone unturned to find the right protection at the right price. I describe more about it in this video.

What’s in an Asset Manager’s Business Insurance Policy or Program?

There are several policy types found in an asset manager’s coverage portfolio, but one of the key things to know is that the most important policy forms are not standardized. A retailer, contractor, manufacturer, or most other types of businesses that buy insurance get the bulk of their coverage on industry-standardized policy forms.

Unfortunately, that’s not the case with the key policy form most asset managers will require; the Errors & Omissions (E&O) plus Directors & Officers (D&O) liability policy. Often called the Asset Management Protector or some other policy name, this combined policy must be customized or tailored to your firm or fund’s particular needs. And that requires a level of expertise that most generalist insurance agents don’t possess. The good news is that The Coyle Group has built a niche of working with hedge funds, private equity, venture capital, private funds, RIAs, and other asset managers and has the skill and expertise to craft an E&O + D&O policy to fit your needs.

Other policies often needed by asset managers include:

  • Commercial Crime Insurance
  • Cyber Insurance
  • General business Insurance includes an Office package, workers’ compensation, and an umbrella.
  • Employment Practice Liability insurance is often combined with Fiduciary Liability insurance.
  • Employed Lawyers Liability Insurance.
  • Kidnap, Ransom & Extortion protection.
  • Corporate Travel Accident Insurance.

What Types of Asset Managers and Financial Service Firms Do We Work With?

We work with a broad array of financial service firms, including:

  • Hedge Funds
  • Private Equity
  • Venture Capital
  • Registered Investment Advisors
  • Wealth Managers
  • Endowment Funds
  • Private Investment Funds
  • Fintech Companies
  • Hard Money Lenders
  • Specialty Finance Firms

Why Financial Service Firms / Asset Managers Need Insurance

The key policy deployed for most financial service firms is the “professional policy,” a combined D&O plus E&O policy. This policy is usually the first one purchased due to the risks it covers and who the policy covers so let’s break that down.

Often this policy is known as the Asset Management Protector, and it covers the advisor, the GP, the board of advisors, and others for claims alleging a wrongful act, error or omission, misleading statement, misstatement, or breach of duty, for the advisor of a fund coverage, extends to their professional capacity for claims alleging failing to provide proper guidance or services to the fund. Claims can be brought by investors, regulators, and others and name defendants personally for their acts which heightens the need for protection. Increasing regulatory enforcement also makes this protection essential.

Often a manager will tell me that their strategy is low risk or their fund is run very carefully and they don’t think they’ll be sued, so the need for insurance protection isn’t warranted. While they may be a well-run fund, claims do occur, and the cost of defending a lawsuit is very expensive in this industry. Claims in the asset management space are not like run-of-the-mill liability lawsuits that arise from a slip-and-fall accident. Fund and advisor-related suits are complex and require expensive law firms to defend against, so I advise startups that professional insurance is a basic cost of entry.

The bottom line is that professional liability insurance protects both the assets of the fund they manage and their personal assets from lawsuits that do arise with relative frequency. Going without coverage isn’t advisable.

What’s the difference between E&O and D&O Insurance for Financial Service firms?

E&O or Errors and Omissions Insurance and D&O or Directors and Officers Liability Insurance.

How are they similar?

How are they different?

In this video, I break down the similarities and differences to give you a better idea of how these two policies work and can work in conjunction with each other to protect your firm.

What is the Best Insurance for Asset Managers & Financial Service Firms?

As you’ve seen already on this page, there are various policy types and coverages often deployed by financial service firms.

The best insurance for a firm like yours is one that is tailored to your specific needs and budget. Then that coverage program is reviewed and updated each renewal to keep pace with your firm’s exposures and changing needs.

Is there a particular insurance company that’s the best at ensuring asset managers and financial service firms?

Not really, and that’s due to the various issues within this industry. For example, Chubb is often an excellent choice for a private equity firm but may not be the first choice for a hedge fund. The big takeaway is that the variety of asset managers and financial firms makes it impossible to say one or two insurers are “the best”. What’s important to remember is that The Coyle Group will leave no stone unturned to find you the best-tailored insurance program for your firm.

What is the Cost of Corrections Coverage?

Cost of Corrections or Trade Error insurance is often endorsed to professional insurance policy to reimburse an insured for the costs to correct or mitigate an error that was made, and if not corrected, it would likely result in a lawsuit against the firm, fund, or manager.
Often this is known in the business as fat finger insurance because a bad keystroke triggers an accidental trade.
There are definite requirements for this coverage to be triggered, so reading this endorsement carefully is important. Further, a sizable deductible will apply when this coverage is triggered. This video provides more details.

How much does Insurance Cost for an Asset Manager / Financial Services firm?

Determining the cost of insurance for different types of firms and funds within this industry vertical is based on a variety of factors. Including:

  • The type of firm or fund you manage.
  • Your assets under management.
  • Your controls and your leadership experience.
  • The strength of your financial statements.
  • The types of policies you purchase

The bottom line is that it’s impossible to ballpark a premium since there are so many variables that go into pricing insurance for an asset manager / financial services firm, but I discuss it in detail in this video.

Why Get Insurance for Your Firm from The Coyle Group?

The Coyle Group is a boutique insurance brokerage focused exclusively on business insurance. We don’t get involved in home and auto insurance, benefits, or life insurance. Because of this laser focus on business insurance and the fact that we specialize in a handful of verticals, including financial services, we’ve developed deep domain expertise within this industry. We also have very broad access to the global insurance marketplace to make sure we leave no stone unturned to find you the best combination of coverages and price.

Read More about Insurance for Financial Services

You cannot copy content of this page