chubb’s department of financial institutions “dfi for dbu” april 7, 2010
TRANSCRIPT
Chubb’s Department of Financial Institutions
“DFI for DBU”April 7, 2010
On the Call …
• Tim Usher-Jones
Underwriting Officer, Department of Financial Institutions
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
CHUBB SPECIALTY INSURANCE (CSI) STRUCTURE
Executive Protection
Department of Financial Institutions
Executive ChubbPro
Why Pursue Financial Institutions?
Growth IndustryCross-Selling OpportunitiesFew CompetitorsDFI Quotes 80% of New
SubmissionsKnowledgeable Partner
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
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
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
DFI Underwriting Criteria
Targeted Financial Institutions must possess the following Targeted Financial Institutions must possess the following characteristics: characteristics:
•Desired nature of OperationsDesired nature of Operations•High quality of management High 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
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 81-107 - November 2006 - Independent Review Committee
• National Instrument 31-103 - September 28, 2009 - national registration regime for financial management firms and individuals
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.
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
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
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
Minimum Premium/Deductible Thresholds
Line Min Ded Min Prem D&O E&O
Fidelity Bond P&C
Fiduciary EPL K&R Mail
$50,000 $50,000 $5,000 $1,000
$10,000 $10,000
Nil Nil
$5,000 $10,000 $1,250 $5,000 $5,000 $5,000 $2,000 $2,500
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
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.
The Coverage SolutionA 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
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
Coverage: Independent Review Committee (IRC) – NI 81-107
Automatic $1,000,000 additional dedicated excess limit for Independent Review Committee (IRC) members, with option to purchase further additional limit.
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
NI 31-103 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
Insurance RequirementsInvestment 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:
Implementation Timeline September 28, 2009 - 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
SolutionThis 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)
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
Email submissions or questions to:
General questions and enquiries:
1.866.821.6660 Product Information and Applications:www.chubbinsurance.com
How Do I Contact Chubb?
How Do I Submit Business?
1.Send your submission to: [email protected]
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…
What Happens Next?
Negotiations
Underwriter Analysis & Review
Underwriter Assigned to risk
Broker confirmsDBU Criteria
Submission Reviewed
SubmissionSent to Inbox
CHUBB INSURANCE COMPANY OF CANADA
Department of Financial Institutions
QUESTIONS?