Financial firms at risk of being underinsured
by Gill Montia
Story link: Financial firms at risk of being underinsured
Marsh is alerting financial firms to the dangers of being underinsured.
According to the broker, European financial institutions are buying less insurance, or decreasing their sums insured, in efforts to reduce costs.
However, claims notifications in some lines of insurance have risen by as much as 400% in the last four years, and rates for directors’ and officers’ liability cover increased by between 10% and over 100% last year.
The Continental Europe Placement Leader for Marsh’s Financial and Professional Practice, Frédéric Boles, comments: “The prevailing economic headwinds across Europe mean that firms are increasingly looking to buy the insurance coverage they need for the least possible cost.”
He adds: “While this strategy delivers short-term savings, in the longer-term it may leave firms underinsured in the event of a claim.”
Separately, Marsh’s research shows that the lines between credit, investment and operational risks are becoming blurred.
For example, some firms try to claim for losses under multiple insurance policies in order to maximise their chances of receiving indemnification.
Parties are therefore focusing on policy wordings and possible interpretations, meaning that legal expenses can be substantial.