Insurance for Banks

A Comprehensive Plan To Protect Your Financial Institution

In a time in which financial institutions find themselves increasingly in the cross hairs of liability challenges, effective insurance for banks has never been more important. Choosing a package of insurance products that ensures total coverage is a crucial step toward long-term security.

A Three-Pronged Strategy

With new threats emerging daily, financial institutions require the expertise of a broker specializing in bank insurance. An insurance bundle covering three main areas is a good start:

  1. Cyber Liability. More and more, banks are exposed to cyber risks resulting from data loss, customer identity theft, fraud or extortion. In April 2018, federal bank regulators released a statement strongly encouraging banks to consider cyber insurance as general liability policies do not offer protection from cyber claims.
  2. Professional Liability. Banks are particularly vulnerable to claims of negligence, wrongful acts and errors on the part of employees and officials. Several policy and endorsement options exist that specifically protect financial institutions from such claims.
  3. Crime Insurance. Few businesses are more susceptible than banks to debilitating exposure to criminal acts. Wire fraud is particularly rampant and ranks as perhaps the most dangerous new threat while an old one—employee dishonesty—will always be a serious problem.

Now more than ever, effective insurance for banks is essential to the long-term health of a financial institution. A comprehensive package of coverage is targeted to provide full coverage in a challenging environment.

Insurance for Banks to Address the Many Issues You Face

There are a variety of financial institutions operating within the US, from captive financial companies to community banks. People, small businesses, and large corporations require the right combination of processes, employees, and the right vision to navigate through the fast-moving landscape that is the banking industry.

Banks must constantly be adapting to regulatory changes, focus on minimizing any exposures to systemic risk, while correctly anticipating the effects of economic shifts that may occur, underlying the need for an insurance carrier that understands these unique risks and challenges and can provide the necessary Insurance for Banks as well as answer any questions regarding what policies will best serve these giants of the industry.

Some important policies to consider

As a whole, lending institutions need directors and officers insurance along with a commercial general liability policy. Some may determine that a fidelity bond is a better insurance solution for their needs. There is an intrinsic need to adhere to all regulatory compliance regulations or face possible penalties and fines. This is an area where an Enterprise Risk Management (ERM) strategy really comes in handy.

Whether your concerns lie in internal employee misconduct, executive liability issues or technology system attacks, you need a comprehensive program that addresses each individual concern. An insurer familiar with dealing in banking and financial institution practices and that serves commercial banks, credit unions, investment banks, business development corporations, private equity funds, mortgage companies and consumer finance organizations is best prepared to serve these needs.

Protecting assets is a priority for any bank, regardless of their size. One of your goals should be to extend your protection beyond traditional coverages with programs designed to surpass many of the industry guidelines. In today’s competitive market, banks and other financial institutions increasingly offer services that go beyond traditional banking. The more services offered, the greater the chances of being sued. Don’t sell your customers or clients short: get the coverage that is designed specifically to help protect you from claims arising out of the professional services you render to your customers.

The right time to buy Insurance for Banks is before any exposures you may be facing come to light. Partner with an insurer that is focused on delivering a positive financial impact while navigating a complex, evolving industry.

Cyber Concerns and Insurance For Banks

State and federal banking regulators have put their primary focus on cyber security, which include cyber insurance both as a risk management strategy and for purposes of demonstrating regulatory compliance. Financial institutions should review their cyber insurance security policies carefully to ensure that the scope, limits, and sub limits of the coverage are appropriate to their needs.

The amounts of insurance in place for cyber liability concerns should be commensurate with the level of risk involved with the bank’s daily operations as well as the type of activities that are to be provided. Bank owners and operators should also understand that not all cyber insurance products provided, as part of Insurance for Banks, are the same since the scope of coverage can vary dramatically among products offered by the different insurance carriers available.

Banks require protection against hackers

Computer systems are susceptible to intrusions. Cyber insurance is more of a concept rather than a product, so it’s unclear what criteria regulators will use to evaluate a bank’s cyber insurance, particularly in light of the rapidly changing insurance market where cyber issues are prevalent. At the very least, banks should be aware that their traditional insurance, such as commercial general liability and D&O, will most certainly exclude coverage for privacy breaches.

Some coverage may be found in a bank’s financial institution bond or E&O policies, but at best it will be insufficient for the costs associated with any loss of personal and confidential information. In addition, most banks have by now purchased some form of stand-alone specialty cyber product, and regulators likely will deem that, moving forward, this is now a necessity.

However, there currently is no such thing as a “standard” specialty cyber policy, so it is unclear whether regulators will deem the mere purchase of a cyber policy as sufficient to meet their standards. Banks are heavily dependent on the trust of their customers, shareholders, creditors, and government agencies. Therefore, banks should consider evaluating at least three variables that impact the amount of Insurance for Banks (that deals with cyber insurance issues) that they are carrying. These are the risks insured, the losses insured, and limits and sub limits.