There’s no straightforward answer to this but we’re here to advise.
We insure some funds that have over £100million of assets under management, but only the very largest firm could afford to buy £100million of insurance.
Your Financial Conduct Authority (FCA) requirements might determine how much you need. Depending on your FCA permissions it may be compulsory for you to have a minimum level of cover, particularly if you have exposure to consumers. That minimum for consumer-related business (advisory) is often £1,850,000.
For larger businesses, you need to weigh up the cost of insurance versus the policy limits purchased and you’ll need to consider several factors, such as the assets under management (AUM), fees charges, types of investors, class of investment, previous complaints and claims.
Some policies are determined by a percentage of funds under management, for example, if you have £100million funds under management you might purchase cover for 5% of that, giving you £5million professional indemnity.
Directors’ and officers’ insurance can be more prescriptive if your firm has external officers that support the functioning of the firm, such as professional investors. Professional investors and venture capitalists, may insist that the funds managed have a minimum level of directors’ and officers’ insurance linked to the level of investment. It’s also common for those investors to insist upon key person insurance for the lead fund managers.
