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Chubb’s Department of Financial Institutions “DFI for DBU” April 7, 2010.

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Presentation on theme: "Chubb’s Department of Financial Institutions “DFI for DBU” April 7, 2010."— Presentation transcript:

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2 Chubb’s Department of Financial Institutions “DFI for DBU” April 7, 2010

3 On the Call … Tim Usher-Jones Underwriting Officer, Department of Financial Institutions

4 Presentation Overview Reasons to Pursue F.I.’s Classification of Financial Institutions The Products Underwriting Criteria Asset Manager Focus Topical Industry Trends and Regulation Questions

5 CHUBB SPECIALTY INSURANCE (CSI) STRUCTURE Executive Protection Department of Financial Institutions Executive ChubbPro

6 Why Pursue Financial Institutions? Growth Industry Cross-Selling Opportunities Few Competitors DFI Quotes 80% of New Submissions Knowledgeable Partner

7 Classification of Financial Institutions 1. Depository Institutions Banks, Finance Companies, Credit Unions, Trust Companies, Mortgage Companies, Leasing Companies 2. Financial Management Firms Investment Advisors, Stockbrokers, REITs, Mutual Funds, Wealth Managers, Venture Capital Firms, Investment Bankers 3. Insurance Providers Insurance Companies, Reinsurance Companies 4. Service Organizations Exchanges, Financial Intermediaries, Funds Transfer Organizations, SRO’s

8 DFI Product Overview Employee Practices Liability Fidelity Bonds Automobile Boiler & Machinery Kidnap & Ransom Mail Insurance Umbrella & Excess Computer Crime Integrated Risks Alternative Risk CyberSecurity Venture Capital Asset Protection Trust Company E&O Insurance Company Professional Liability Forefront by Chubb for Insurance Co’s Excess Policy Mutual Fund Professional Liability Not For Profit D & O Directors & Officers Liability Fiduciary Liability General Liability Business Income Errors and Omissions Liability Property Workers’ Compensation Builders Risk Wrap -up Liability Captives Banker’s Professional Liability BrokerEdge Family Office Pak ForeFront By Chubb ForeFront By Chubb For Investment Advisors

9 DFI Product Overview Employee Practices Liability Fidelity Bonds Automobile Boiler & Machinery Kidnap & Ransom Mail Insurance Umbrella & Excess Computer Crime Integrated Risks Alternative Risk CyberSecurity Venture Capital Asset Protection Trust Company E&O Insurance Company Professional Liability Forefront by Chubb for Insurance Co’s Excess Policy Mutual Fund Professional Liability Not For Profit D & O Directors & Officers Liability Fiduciary Liability General Liability Business Income Errors and Omissions Liability Property Workers’ Compensation Builders Risk Wrap -up Liability Captives Banker’s Professional Liability BrokerEdge Family Office Pak ForeFront By Chubb ForeFront By Chubb For Investment Advisors

10 DFI Underwriting Criteria Targeted Financial Institutions must possess the following characteristics: Desired nature of OperationsDesired nature of Operations High quality of managementHigh quality of management Proven track recordProven track record Minimum equity of $1MMinimum equity of $1M Profitable operating historyProfitable operating history Proven risk management proceduresProven risk management procedures Favourable Litigation/ Loss HistoryFavourable Litigation/ Loss History

11 The Opportunity The business of managing investments is riskier and more complex than ever: Varied business models such as Mutual Fund Managers that own distribution, stand-alone Investment Advisory firms and finally Investment funds that are structured as trusts versus corporations Outside the Canadian Banks, very few large independent asset managers left, but many small private firms Dynamic regulatory environment, increased scrutiny National Instrument November Independent Review Committee National Instrument September 28, national registration regime for financial management firms and individuals

12 The Opportunity (cont’d) Rapidly evolving products, structures and distribution channels of the asset management industry Mergers and acquisitions activity has meant several mid-sized firms are gone and we are left with a handful of large asset managers that manufacture and distribute investment product Global marketplace means clients can be non-Canadian, firms often own subsidiaries in foreign jurisdictions as well as set up off-shore funds Asset management firms and their investment funds need proven insurance coverage that can easily adapt.

13 ForeFront for Investment Advisors Insuring Agreements: Employment Practices Liability Fiduciary Liability Directors and Officers Liability Investment Advisors E & O Liability Outside Directorship Liability Sources of Loss Include: Statutory Liabilities Wrongful Termination Breach of Fiduciary Duty Breach of Investment Objectives

14 VCAP (Venture Capital Asset Protection) Insuring Clauses: Management Liability Coverage (D&O) Management Indemnification Coverage (SIDE A) Errors and Omissions Coverage (E&O) Sources of Loss Include: Breach of Contract Tortious Interference Oppressive Conduct Breach of Offering Memorandum

15 CANCAP (Canadian Capital Asset Protection Professional Liability) E&O Coverage For: Small to Mid-Sized Canadian Financial Institutions that offer a variety of financial services All directors, officers and employees (past and present) Separate Tower of Insurance for Approved Persons For claims arising out of Services such as: Fiduciary/Trust Dept Investment Advisor/Fund Mgmt Lending Broker/Dealer Activities Funds Transfer Distribution of Life Insurance and Mutual Fund Products Investment Banking

16 Minimum Premium/Deductible Thresholds

17 Product Highlight: AMP Asset Management Protector SM by Chubb

18 Asset Managers need insurance that is: Designed for their industry Customizable to how they want to structure their insurance coverage Flexible enough to respond to their individual business model Able to address numerous combinations of asset management structures and their foreign equivalents Easily and seamlessly adaptable to operational changes during the policy period Easy to work with and easy to understand Backed by a strong carrier with claims expertise in their industry

19 Target Markets Registered Investment Advisors Portfolio Managers Fund managers/sponsors Mutual Funds Pooled Funds Private Funds/Hedge Funds Investment companies and funds domiciled outside Canada.

20 The Coverage Solution A flexible, modular liability insurance policy that helps protect firms and funds from their most critical professional and management liability exposures: Professional Liability (Errors and Omissions Liability) Directors and Officers (D&O) Liability Employment Practices Liability Fiduciary Liability

21 Coverage: Broad Definition of Professional Services In Professional Liability Coverage Part, definition includes: In addition to investment advisory and management services, asset allocation services; fiduciary capacity as respects third party plans; selection of outside managers and service providers; publication of written material Insuring clauses include vicarious liability

22 Coverage: Independent Review Committee (IRC) – NI Automatic $1,000,000 additional dedicated excess limit for Independent Review Committee (IRC) members, with option to purchase further additional limit.

23 Typical Claim Scenarios Claims by clients for breaches of investment guidelines Prospectus liability claims against mutual fund directors, advisers, and service providers Formal regulatory investigations into alleged trading violations Claims alleging failure to disclose risks or conflicts of interest Claims for failure to perform due diligence in the selection and oversight of sub-advisers or outside funds Improper valuation of fund assets

24 Asset Manager Relevant Regulations National Instrument

25 NI Categories of Registration Three general categories; 1. Dealers Investment (IIROC), Mutual Fund (MFDA), Scholarship Plan, Exempt Market, & Restricted Dealers 2. Portfolio Manager (Adviser) 3. Investment Fund Managers

26 Insurance Requirements Investment Dealers$500K or $200K for Type 1 (IIROC-400.4) Mutual Fund Dealers$50K per Approved Person up to $200K, $500K for Level 4 (MFDA Rule 4.4) Scholarship Plan, Exempt Market, and Restricted Dealers $50K per employee up to $200K Portfolio Managers$50K no access to client assets or $200K Investment Fund Managers$200K Maximum: Formula based on 1% of total assets or assets under management, up to $25 Million. Minimum:

27 Implementation Timeline September 28, Registration March 28, 2010 – Meet Insurance Requirements September 28, 2010 – New Categories “Transition” and meet Insurance Requirements: Investment Fund Manager, Exempt Market Dealers and Scholarship Plan Dealers

28 Solution This is an opportunity for client introduction and to demonstrate knowledge We can accommodate full $25M limit requests Chubb is the #1 writer of fidelity bonds in North America (SFAA)

29 Why Chubb? Unprecedented Claims Philosophy dedicated to superior claims services Chubb’s DFI team is comprised of more than 145 professionals in 46 branches worldwide Chubb’s superior Financial and Claims Ratings: S&P- AAA Moody’s- Aa1 A.M. Best- A++ Brand recognition, Insuring asset managers for more than 30 years

30 submissions or questions to: General questions and enquiries: Product Information and Applications: How Do I Contact Chubb?

31 How Do I Submit Business? 1.Send your submission to: 2.Specify what coverage(s) you are looking to place. 3.The submission will be reviewed and you will be asked to confirm the following DBU criteria…

32 What Happens Next? Submission Sent to Inbox Submission Reviewed Broker confirms DBU Criteria Underwriter Assigned to risk Underwriter Analysis & Review Negotiations

33 CHUBB INSURANCE COMPANY OF CANADA Department of Financial Institutions QUESTIONS?


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