Investments Management

Accidents can take place anytime, anywhere without notice, and a business is always at risk. In case something unfortunate happens at your property or factory, the responsibility for damage to property and people come on you as the business owner.

In the finance and financial services industry, businesses are exposed to high risk of legal liability, and business insurance is an important asset to have. When it comes to handling money and assets, there are always parties that are at risk of litigation, or causing financial harm to others. The need for a Directors & Officers liability was in fact pioneered by the finance industry. Similarly a professional indemnity cover is a must have for all entities managing funds or investments.

Benefits

This policy covers the loss of any insured entity(or the loss of an insured person paid for by the insured entity) which arises out of a claim made for a wrongful professional act(professional liability), or a wrongful managerial act(management liability). The insurer will also reimburse any insured entity or any fund or any plan for its direct financial loss resulting directly from any act of infidelity; or third party crime.These are generally divided into 4 sections:

  • Professional Civil Liability : Covers professional liability by any investment manager entity. This can be thought of as a professional indemnity cover for the company.
  • Fund Professional Civil Liability and Management Liability : Covers professional liability(professional indemnity) as well as management liability(akin to a D&O cover) for any investment fund.
  • Investment Manager Management Liability : This liability policy covers the management liability (directors & officers liability) of any investment manager
  • Investment Manager and Fund Crime Protection : This liability policy covers any fund for losses it may incur from an act of infidelity or due to a third party crime.

Extensions(Add-ons)

Investment manager’s liability policy cover extends to subsidiaries and funds; subsidiary shall include all automatic subsidiaries; fund shall include all automatic funds. In respect to crime protection and infidelity cover, any automatic subsidiaries or automatic funds shall only be covered in respect of any act, omission or event committed after the date of acquisition and whilst such entity is a subsidiary of the policyholder or a fund managed by an insured entity.

If this policy is not renewed or replaced with similar cover, the policyholder shall be entitled to a discovery period, automatically of 30 days.

  • Kidnap response : In the event of a kidnapping, hijacking or wrongful detention of an insured person during the policy period, the insurer will pay for kidnap response costs of up to specified sublimit incurred through the named kidnap consultants after they have been contacted as specified in the schedule.
  • Regulatory crisis response : Apart from investigation costs, the insurer will pay, as part of the limit of liability up to specified sublimit for regulatory crisis response costs incurred through the regulatory response team only in response to a critical regulatory event that does not fall within the definition of claim or investigation.
  • Mitigation and avoidance services :The insurer has arranged for the regulatory response team to make available during the policy period, upon election by the policyholder, the loss avoidance services package specified in item 9 of the schedule. These services are detailed in Appendix 1 to this policy
  • Discovery period for retired insured persons :This extension allows retired insured persons shall automatically be entitled to a discovery period of 6 years. These benefits apply even if policy is not renewed.
  • Emergency costs :If, due to an emergency, the insurer’s written consent cannot reasonably be obtained before defence costs are incurred with respect to a claim for a wrongful managerial act, then the insurer will give retrospective approval for such defence costs up to specified sub limit in the aggregate.
  • Court Attendance :With this extension, defence costs shall include an allowance for each day on which an insured person has been required to and has attended court as a witness in connection with a claim notified under and covered by the policy. Their retention/deductible usually doesn’t apply to this extension.
  • Repair of computer programs :The insurer shall reimburse any reasonable expenses incurred by policyholder, for the verification or reconstitution or removal of electronic computer programs which have been fraudulently or maliciously prepared, modified or deleted to give rise to a payment for direct financial loss. This must happen with the prior written approval of the insurer. The insurer’s liability under this extension can be limited to the lesser of the limit of liability or a specified amount in the aggregate for the policy period.
  • Stockbrokers legal liability for incomplete transactions :This extension covers direct financial loss resulting directly from a legal liability to a third party caused by policyholder’s failure to complete a stock exchange transaction, due to:
    • a fraudulent transaction;
    • the physical loss of, damage to or destruction of property; or
    • the insured having been deceived as to the identity of any person for the buying or selling of property.
    Transaction attempted must be governed by stock exchange rules which was entered into in the course of the insured’s business as a stockbroker. The limit of liability under this extension will be set separately.

Exclusions

Under this investment managers liability policy the insurer shall not be liable to make any payment under any circumstance for the following exclusions:

  • Prior Knowledge and Prior Discovery :The investment manager’s liability policy does not cover any loss in any way connected with a claim, or circumstance likely to give rise to a claim, for a wrongful act which a responsible person: (i) had knowledge of prior to continuity date, or (ii) had knowledge of prior to inception of policy, or (iii) had notified insurer under previous policy Any loss arising from fact alleged in or a wrongful act which is pertinent to any claim or circumstance referenced in (i), (ii) or (iii) above will also not be covered. Investment manager’s liability insurance policy does not cover any direct financial loss discovered prior to the inception date of the policy period; or subsequent to the expiry of the policy period.
  • Bodily Injury/Property Damage :This liability product is meant to provide professional and managerial liability to investment managers and other financial service entities, so as such it doesn’t cover any losses arising from Bodily Injury or Property Damage.This includes any losses arising from bodily injury, sickness, disease, death or emotional distress, or damage to, destruction, impairment or loss of use of any property.This exclusion does not apply to any claim because of an employment practice violation; defamation; injurious falsehood; or loss of, damage to, destruction of or reconstruction of documents or securities; provided those covers are added in the policy schedule.
  • Established Misdeeds :Investment manager liability policy doesn’t cover any wrongful act intended to gain profit or advantage to which the insured entity was not legally entitled. This includes the intentional committing of, aiding, abetting or condoning of or conniving at dishonesty or fraud; as well as any criminal breach of law or regulation, if any of the above is established by final adjudication of a judicial or arbitral tribunal, admission by an insured or fund or written finding of a regulator.
  • Pollutants :Investment manager liability policy doesn’t cover any losses involving pollutants, directly or indirectly. However, this exclusion, with respect to wrongful managerial acts, shall not apply to: (i) defence costs which fall within non-indemnifiable loss; or (ii) any claim against any director or officer by a shareholder alleging damage to that company or its shareholders due to a breach of duty owed by the director or officer.
  • Trustees :Investment managers liability doesn’t pay out in case of any wrongful managerial act or wrongful professional act by an insured person as a trustee, fiduciary or administrator of an insured entity’s or fund’s pension, profit-sharing or employee benefits programme.
  • Insured v insured/parent company :This policy doesn’t payout to any claim brought by or on behalf of any insured entity or fund, or successors or assigns of any insured entity or fund, unless such claim is brought on behalf of: (i) an employee as a customer or client of an insured entity or fund and is not brought with the voluntary (rather than legally required) intervention of any insured entity against whom it is brought; or (ii) a fund, on advice from independent legal counsel selected by and at the expense of the fund because the failure to make such claim would be a breach of duty owed by the directors and officers of such fund.
  • Infrastructure :Investment managers liability policy will not pay out any claims for losses caused by electrical, software or mechanical failures, defects or disturbances, including any electrical power, communication or other utility interruption, surge, brownout or blackout, wear and tear or electromagnetic radiation. This exclusion shall not apply to any claim to the extent that it results from a wrongful professional act committed by an insured person in using the systems of an insured entity.
  • Insolvency :Investment managers liability doesn’t cover any claims arising from the insolvency, receivership, bankruptcy or liquidation of an insured entity or fund.
  • Patent/Trade Secret :Investment managers liability policy shall not pay out any claims for breach of any intellectual property licence, patent, trade or service mark; any other form of registered intellectual property right or any breach of a right to privacy or misappropriation of a trade secret.
  • Proprietary Risk :This policy doesn’t cover any proprietary trading loss, financial loss or a business loss where an insured entity or fund is acting on its own behalf or as principal.
  • Regulatory :The investment manager’s liability policy doesn’t cover any claim brought by, in the right of, on behalf of or instigated by any regulator whether directly or indirectly, except: (i) with respect to investigation costs; (ii) when acting solely in such regulator’s capacity as a customer or client of an insured entity or fund; or (iii) when acting on behalf of any client or customer of an insured entity or fund pursuant to any statutory provision.
  • Shareholder :Investment managers liability doesn’t cover any claim brought by, in the right of or on behalf of any shareholder of an insured entity or fund unless brought as a customer or client of an insured entity or investor in a fund.
  • Contractual Liability : The investment management liability insurance does not over any risk assumed or accepted by an insured or fund under: (i) any contract or agreement except to the extent such liability would have attached to the insured or fund in the absence of such contract or agreement; (ii) a guarantee or warranty This exclusion shall not apply to an insured person’s contract of employment with an insured entity or fund.
  • Fees, Commissions, or other Compensation : Investment managers insurance doesn’t apply in case of any losses because of fees, commissions, or other compensation for any investment management services rendered or required to be rendered by an insured or fund or that portion of any settlement or award in an amount equal to such fees, commissions, or other compensation.
  • Consensual claims :The insurer shall not be liable to make any payment to a fund for professional or managerial liability or a professional investment manager for managerial liability for any loss attributable to: (i) any consensual claim; or (ii) a claim brought within the United States of America, its states, localities, territories or possessions or under any laws thereof by or on behalf of any: (a) insured entity; (b) fund (c) outside entity in which any insured person serves or served as an outside entity director; or (d) insured person of such insured entity, fund or outside entity; (iii) except for any claim against an outside entity director or a director or officer: (a) pursued as a shareholder derivative action on behalf of an insured entity, fund or outside entity; (b) for an employment practice violation brought by any insured person; (c) pursued by an insured person for contribution or indemnity, if the claim directly results from another claim otherwise covered under this policy; (d) pursued by any past director, officer or employee of an insured entity, fund or outside entity; or (e) pursued by an insolvency administrator, receiver, trustee or liquidator of any insured entity either directly or derivatively on behalf of an insured entity, fund or outside entity; This exclusion shall not apply to defence costs of any insured person unless the claim is determined to be a consensual claim by final adjudication of a judicial or arbitral tribunal, written finding of a regulator or admission by an insured or fund.
  • Other Exclusions

    • Authorised Access :Direct financial loss resulting from the input of electronic data at an authorised electronic terminal by a customer, or another person who had authorised access to the customer’s authentication mechanism, unless: a. customer was accessing computer system for a purpose not pre-agreed by the insured entity or fund, and b. such act was committed with the intent to cause the insured entity or fund to sustain a direct financial loss;
    • Credit Risks :Investment management insurance doesn’t cover any direct financial loss resulting from the complete or partial non-payment or default upon any loan, unless such direct financial loss results directly from an act of infidelity, a fraudulent transaction or a computer fraud.
    • Directors Infidelity :Investment managers insurance doesn’t cover any direct financial loss resulting from any act of infidelity of any director, or officer or partner of an insured entity or fund, except to the extent that the director or officer is deemed to be an employee under the policy definitions
    • Employee Infidelity :Investment managers insurance does not cover any direct financial loss resulting from any act of infidelity unless such direct financial loss is specifically mentioned to be covered.
    • Extortion/Kidnap :Investment managers liability doesn’t extend to any direct financial loss due to or payment for extortion, kidnapping, hijacking or wrongful detention except to the extent such sums are covered under the extension.
    • Fraudulent features in computer programs :Investment managers liability doesn’t cover any direct financial loss resulting from fraudulent features contained in computer programs developed for sale to, or that were sold to, multiple customers at the time of their acquisition from a vendor or consultant unless: a. no other purchaser of the computer programs has sustained an insurable loss resulting from such fraudulent features during the period of 60 days from the date of discovery of the direct financial loss by an insured entity or fund; b. at the time of direct financial loss such fraudulent features were contained solely on the computer programs of an insured entity or fund and not on those sold to any other customer; or c. such fraudulent features were inserted subsequent to the date of their acquisition;
    • (vii) Indirect Loss :Investment managers insurance doesn’t cover any indirect or consequential loss of any nature. This includes losses such as: a. sum representing loss or deprivation of income or profits (including but not limited to interest and dividends), except to the extent such sums fall within the definition direct financial loss;. b. any sum arising out of, based upon or attributable to: i. business interruption (including loss of computer time or use), ii. mechanical, electronic or software failure, faulty construction, error in design, latent defect, wear or tear, gradual deterioration, electrical disturbance, electronic data corruption, failure or breakdown or any malfunction or error in programming or errors or omissions in processing, or iii. loss of or damage to any property whatsoever by reason of wear, tear, gradual deterioration, moth or vermin.
    • Property damage :Investment managers liability doesn’t cover any losses arising from property damage.
    • Property in the Mail :Any sum attributable to loss of property while in the custody of any postal service, other than property sent via registered mail, recorded delivery or courier is not covered by an investment manager’s policy
    • Proprietary Information, Trade Secrets and Intellectual Property :Any direct financial loss or the actual or alleged plagiarism of, or arising directly or indirectly from the accessing of, any confidential information (including but not limited to trade secrets, computer programs, customer information, patents, trademarks, trade names or copyrights), except to the extent that any such confidential information is used to support or facilitate the commission of an act of infidelity or third party crime covered by this policy;


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