Insurance for this sector is usually purchased in a package or portfolio. This means the financial lines insurance form part of a single package with a single insurer. This is particularly common for small and medium-sized financial services companies, asset managers, financial institutions or venture capital companies.
The most common package combines professional indemnity, crime insurance and directors’ and officers’ insurance. Recently, some insurers have started to offer cyber insurance, and in some cases public and employers’ liability extensions.
We advise you get professional indemnity and directors’ and officers’ insurance as a minimum. In fact, depending on your Financial Conduct Authority (FCA) permissions, professional indemnity might be compulsory.
Depending on whether you handle client funds on your own platform, crime insurance might or might not add value. We can help advise you.
In recent years, we have seen an increase in claims, in part driven by social media and campaigns by some law firms, often referred to as ‘claims farmers’. These campaigns, previously focused on large investment providers, are now targeting companies of any size.
This can be complicated but insurers, and brokers, should be transparent about exclusions.
We will be able to advise but it’s worth knowing that:
It is crucial that you understand your policy excess and how it can be applied in practice because excesses for this sector can be very high, with some starting at £25,000.
It can be complicated too but we can advise you.
Some excesses will apply to “each and every claimant”. This means that if your investment portfolio suffers a sudden crash due to unforeseen external forces and you receive several claims from investors simultaneously, your excess will apply to each claimant. If you have a £25,000 excess and receive five investors complaints, that would result in a total policy excess of £125,000 for the business.
Other policies will state that claims related to the “same originating cause” are deemed to be one claim and one excess – a more favourable approach for financial services
Insurance for fintech companies is usually purchased in a package or portfolio. This means the financial lines insurance form part of a single package with a single insurer. This is particularly common for small and medium-sized companies.
The most common package combines professional indemnity, crime insurance, directors’ and officers’ insurance and cyber insurance. Recently, some insurers have started to offer public and employers’ liability too, and in some cases office and computer equipment extensions.
We advise you get professional indemnity, cyber and directors’ and officers’ insurance as a minimum. In fact, depending on your Financial Conduct Authority (FCA) permissions, professional indemnity might be compulsory.
Depending on whether you handle client funds on your own platform, crime insurance might or might not add value. We can help advise you.
Whatever you decide, it’s crucial you use the same insurance provider for both professional indemnity and cyber insurance. If something goes wrong with your platform or software, related to a cyber-attack, it can result in complaints from clients too but having the same provider handling the cyber and professional indemnity claims will help protect your business.
In recent years, we have seen an increase in claims, in part driven by social media and campaigns by some law firms, often referred to as ‘claims farmers’. These campaigns, previously focused on large investment providers are now targeting companies of any size.
Professional indemnity for fintech companies is unique as it should cover both traditional claims linked to allegations of mistakes and negligence, but also claims related to software deliverables, accessibility and performance.
In financial services that is typically anything that is deemed to be a complaint under Financial Conduct Authority FCA rules.
It will help you provide a formal response to any complaints and will also cover any compensation that the Financial Ombudsman Service, you or your insurers deem payable.
Comprehensive professional indemnity for fintech companies must also cover the company’s reliance on software. You may also be reliant on up-time, accessibility, but also the software working as it should.
We know that PSD2 is a type of insurance that people often search for but it’s not something insurers usually sell as a separate product. Instead, most leading insurance companies will cover the activities associated with PSD2 within their fintech insurance products.
A fintech insurance product will have language related to PSD2 to ensure sufficient coverage for Account Information Service Providers (AISP), Payment Initiation Service Providers (PISP), Electronic Money Institutions (EMI) and Payment Institutions.
It is also a Financial Conduct Authority requirement for those applying for permissions related to AISP or PISP activities to have sufficient insurance. This will need to be shown as part of your application process and maintained at all times.
Fintech companies hold sensitive data, have access to sensitive systems and in some cases handle client money. As such, they are a huge target for cyber criminals.
In addition, the knock-on effects of cyber-attacks in the financial services industry can be more catastrophic than cyber-attacks in other industries.
Cyber insurance will provide essential protection and assistance for:
This can be complicated but insurers and brokers should be transparent about exclusions.
We will be able to advise but it’s worth knowing that:
We cover fintech companies of all types:
There’s no straightforward answer to this but we’re here to advise.
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 the services performed, fees charged, types of investors/clients, and previous complaints and claims.
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 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.
