bvca guide to insurance 2010/11

BVCA Guide to Insurance 2010/11 1

Foreword

It is with great pleasure that we introduce BVCA Insurance Services, an innovative commercial platform from the British Private Equity and Venture Capital Association (BVCA). The BVCA is the industry body and public policy advocate for the private equity and venture capital industry in the UK. Our Members are venture capital, mid-market and private equity/large buy-out houses from all over Britain with approximately 6,000 investee companies.

We provide a growing list of services and best practice standards for our Members across a spectrum of activities covering a network of interconnected committees, which focus on segment-led, legal, technical, regulatory, investor-led and service-led needs. We also provide networking opportunities, training courses, research, publications, public affairs and communications on behalf of the industry.

In response to calls from our Membership that includes 220 private equity and venture capital houses we launched BVCA Insurance Services in May 2010 to deliver insurance premium discounts, benefits and specific insurance products to our Members and their investee companies.

The BVCA is committed to developing initiatives that add value to the Membership. The launch of BVCA Insurance Services is illustrative of this commitment and will act as an independent, centralised information source both offering guidance to insurance purchasers and suppliers as well as facilitating discounts and other benefits.

Simon Havers Hugh Lenon Richard Anton

BVCA past Chairman BVCA Chairman BVCA vice Chairman

CEO, Managing Partner, Partner, Baird Capital Phoenix Equity Amadeus Capital Partners Europe Partners Partners Limited

2 BVCA Guide to Insurance 2010/11

INTRODUCTION Xxxxxxx

An A–Z of Private Equity and Venture Capital Companies

* All part of Merlin Entertainments Group** All part of Premier foods

**

** **

**

** *

**

logo poster.indd 1 1/7/10 08:53:45

* All part of Merlin Entertainments Group** All part of Premier foods

June 2010

An A–Z of Private Equity and Venture Capital Companies


Contents Foreword 1

BVCA Insurance Services 4

Broker Q&A 6

BVCA D&O Facility 8

OPInIOn 11

Investing in the Insurance Sector 12

Preventing Cyber Thieves 14

Global Limits Manager 16

Management Liability Insurance 18

Insurance Due Diligence 20

Pensions: Are they Really that Complicated? 22

Environmental Impact and the Impact of the Environment 24

Crisis PR 28

Insurance Contract Hotspots 30

TECHnICAL 33

Buildings Portfolio Insurance 34

Business Interruption Insurance 38

Credit Insurance 34

Crime Insurance for Financial Institutions 42

Directors’ & Officers’ Liability Insurance 46

Employers’ Liability Insurance 50

Environmental Impairment Liability Insurance 52

Intellectual Property Rights Insurance 56

Medical Insurance 58

Office Combined Insurance 60

Professional Indemnity Insurance 62

Warranty & Indemnity Insurance 64

BROKER ACCESS MATRIx 69

BVCA Broker Access Matrix 70

DIRECTORy 72BVCA Insurance Services is authorised and regulated by the Financial Services Authority.

The views and opinions expressed herein are those of the authors and do not necessarily represent those of BVCA Insurance Services.

Registered address: 1st Floor North, Brettenham House, Lancaster Place, London WC2E 7EN


Why did the BVCA decide to set up BVCA Insurance Services?BVCA Insurance Services (BVCA IS) was created due to a high level of Member demand. The BVCA wanted to deliver additional value to their Members through creating a vehicle that could increase insurance purchasing effectiveness, introduce bespoke products and act as an independent information source. BVCA Insurance Services is the first of a number of planned commercial ventures by the BVCA driven at delivering value to Members.

What does BVCA Insurance Services seek to provide Members?BVCA IS provides a structure that delivers:

• Sustainablelikeforlikepremiumsavings

• Long-term insurer partner relationships with high qualityinsurance providers

• BespokeinsuranceproductsinareassuchasD&Oandotherswhere there is a specific requirement

• Anindependentandimpartialinsuranceinformationservice

• An objective tool to assistwith broker selection, the BrokerAccess Matrix (BAM)

• Ahighvaluereturnontimeinvested

What classes of insurance are covered?Savings may be accessed on a wide range of insurance classes including the main Property, Liability and Motor covers as well as specialist insurance such as Directors’ and Officers’ Liability, Professional Indemnity, PA/Travel, Credit and Health/Medical.

How does it work?We have agreed that our Insurer Partners will view the premium spend of BVCA Members and their investee companies as connected, thus creating a virtual portfolio with the leverage to attract volume discounts. The agreed purchasing benefits are simply accessed through the existing broker of the investee company at the time of purchasing insurance, whether for the first time or as a renewal of an existing policy. The benefits provided by BVCA IS canbeenjoyedwhilstmaintainingexistingbrokerrelationshipsandwithout being bound into a rigid structure. Utilising this structure,

BVCA IS enhances existing purchasing channels and does not replicate or seek to replace the role of brokers or insurers.

Are the benefits sustainable?As competition and market-choice is maintained, the discounts offered by the Partner Insurers naturally need to continue to be competitive. The premiums will be tested against competing non Insurer Partners at the time of renewal of the policy.

Are there any particular focus areas?BVCA Insurance Services is set to launch an industry wide Directors’ and Officers’ Liability Insurance facility for investee companies, promoting continuity of coverage across the portfolio combined with a high level of coverage and wording required for private equity-backed companies. Other insurance classes such as Key Man and Trade Credit have been highlighted by the Members during our research phase as areas of interest. We will be putting various facilities together once we have completed our research and designed an ideal solution driven by enhancing the 3Ps, “Price, Product and Process”.

Is there a way to ensure savings are maximised?Adopting a more structured approach can further enhance savings and has proved popular with Members we have met with to date. By undertaking an insurance purchasing data collection from Members and investee companies we can review opportunities to maximise the use of Partner Insurers.

How does BVCA IS participate in the transaction of insurance?While BVCA IS leverages the combined buying power of the Membership, BVCA Insurance Services does not compete with existing purchasing channels, collect premiums, or participate in the transaction of insurance. We work with incumbent brokers to deliver savings.

How does BVCA IS derive income?BVCA IS derives income by receiving a small percentage of the insurance premium from Partner Insurers in the form of a commission. Brokers and Insurer Partners are also able to sponsor various publications produced by BVCA IS including The Guide to Insurance. Brokers who wish to be included in the Broker Access Matrix pay an annual fixed fee.

BVCA Insurance Services

BVCA Insurance Services was launched in May 2010. Here, nathan Sewell and David young answer questions on the new venture.

BVCA


BVCA BVCA Insurance Services

What insurers do you work with and how do you select them?We select Insurer Partners on their ability to provide high quality insurance coverage and their appetite to offer preferential deals to our audience. We simply ask Insurer Partners to offer defined discounts and benefits to BVCA Members and investee companies.

In return for offering these benefits, we offer our Insurer Partners a platform for promotion of new products and services which are relevant and beneficial to BVCA Members and investee companies; the opportunity to participate in structured portfolio programmes for specific BVCA Members and increased brand visibility to insurance buyers.

Our launch Insurer Partners are Chartis, QBE and Dual Corporate Risks.

Do you provide advice to Members and their investee companies?BVCA Insurance Services acts as an independent centralised information source which can offer general guidance on insurance purchasing and broker selection via the Broker Access Matrix. We do not seek to replace the specific policy advice usually provided by a company’s brokers.

There are a number of tools we have produced to help Members and investee companies. Firstly this Guide which is our annual reference publication providing an outline the services of BVCA IS; information on Insurer Partner agreements; a Directory of insurance providers; technical information on a class by class basis; commentary on topical issues. The Guide is available to all Members and investee companies and is published both in hard & soft copy.

Secondly, we have created the Broker Access Matrix to help Members and investee companies who are actively seeking alternative broker arrangements. The Matrix is designed to provide a fast and efficient mechanism for matching the needs of Members and investee companies with insurance providers. We are currently in the process of an extensive data gathering exercise brokers who have chosen to participate in the Matrix.

Thirdly, we have created a Directory of insurance industry providers which can be accessed via the website: www.bvcainsurance.com

and is published within The Guide. We anticipate this Directory will increase in scope and volume over time.

What if we want to change our broker?BVCA Insurance Services will work alongside any broker in the UK or mainland Europe to help facilitate the connection of industry wide discounts and benefits to Members and investee companies. The Broker Access Matrix should be a useful tool in this selection process.

What is the geographical scope of savings?We are launching BVCA IS in the UK initially and intend to broaden the scope to include European and operations of investee companies in the near future.

Who is on the BVCA IS Team?BVCA Insurance Services is headed by nathan Sewell who has a 20 year insurance background having led M&A teams at both Aon & Willis. Nathan is supported by experienced insurance professionals who interact with Members, investee companies, brokers and insurers on an ongoing basis to maximise the benefits to Members and investee companies.

David young is non-executive chairman of BVCA Insurance Services and combines his experience as a non-executive director in the insurance sector with strong ties to the private equity industry. He is currently non-executive chairman of Annuity Direct, and senior independent director of British Gas Insurance and British Gas Services and of Partnership Assurance, which is backed by the private equity group Cinven. Earlier in his career David was chief executive of listed insurance broking group, Bradstock.

Jason Edwards is the Development Manager for BVCA Insurance Services. Previously, Jason was Marketing Director of Protean Investment Risks, responsible for all aspects of business production.PriortojoiningProtean,JasonworkedatWillisLimitedwhere he was Business Development Director responsible for branding and marketing within the Financial & Executive Risks (FINEX) team.

Visit the BVCA Insurance Services website at www.bvcainsurance.com

nathan Sewell David young Jason Edwards


What is expected of insurance brokers who act for our Membership and their investee companies?We have negotiated a range of benefits for our Members/investee companies, on an industry wide basis. In most cases (but not all) we would expect the terms available as a result to be more attractive than would otherwise be achievable from that insurer. It may also be that certain Partner Insurers are not those that brokers would have a large volume of business with. Our expectation is that brokers should look to access insurers with whom BVCA insurance Services is in partnership, to evaluate if those insurers are suitable for the Member or investee company concerned.

The structure of our relationship with Partner Insurers dictates that the commercial tension of the broking process remains unfettered.

Is there any financial commitment from broker to participate?There is no compulsory financial commitment for brokers who wish to access the benefits on behalf of their Members and investee companies. We have designed a number of partner broker packages that provide options to increase the connection and involvement with BVCA Members and their investee companies but these are entirely optional.

Which classes of insurance are covered?The agreement with Chartis and QBE include all the main commercial covers that a corporate buyer would purchase. We will also be launching specific products tailored to Member and investee company’s specific needs.

How have BVCAIS been able to negotiate discounts and benefits?We have created the concept of the ‘BVCA Portfolio’ whereby Partner Insurers have agreed to view the insurance spend of BVCA Members and their investee companies as connected. Through the leverage of this connected spend, we have been able to produce beneficial terms.

How are the discounts accessed?Each Partner Insurer’s underwriting team will be aware of the benefits that are to be offered. As the acting broker for

a BVCA Member or Investee Company, you should alert the Partner Insurer and “tag” your client at the time of obtaining a quotation. The tagging process ensures that your client becomes a member of the BVCA Portfolio allowing Partner Insurers to offer benefits.

Will BVCA Insurance Services contact us?If we are working with Members or investee companies to identify potential for benefits, then we may alert the incumbent broker prior to renewal if we feel that this will help maximise the benefits gained by the Member or investee company or otherwise assist the flow of business.

Will BVCA Insurance Services contact our client?BVCA Insurance Services will be working with Members and investee companies to assist them in identifying where benefits may be available to them. This will involve us having dialogue with both BVCA Members and investee companies where appropriate to achieve this.

What happens if we place business with a Partner Insurer?Assuming that the business has been identified (tagged) and transacted as a BVCA Portfolio transaction, then we will request that you notify us of some basic details once the business is placed. A simple format will be provided for this purpose. We acknowledge that permission will need to be given by the Member or investee company concerned to release this information.

How do the Partner Insurers deals affect our obligations under the FSA Treating Customers Fairly (TCF) Guidelines?They do not affect these obligations, the offerings need to be viewed alongside offering from non partner insurers, the same will be true of any of the BVCA Insurance Services branded products or future offerings.

What will be the likely focus of the BVCAIS branded products?We will have a Directors’ & Officers’ Liability product in place by Q3 2010, specifically designed for investee companies backed or supported by private equity funding. There are also a number

Broker Q&A

Insurance brokers who service our Members and their investee companies are an integral part of the BVCA Insurance Services platform.

BVCA


BVCA Broker Q&A

of other products we are currently discussing with Members to assess where we can bring value in terms of coverage, premium or process.

What benefits can we gain from actively working with BVCA Insurance Services, Members and investee companies?The principal benefit will be that your client will access terms that may be preferential to those that would be otherwise available. This should directly assist with client service, satisfaction and ultimately retention.

How can we identify if our client is an investee company of a BVCA Member?Associate Professional Members of the BVCA are in the position to obtain information on BVCA Members through the BVCA website. Non-Members who are unsure as to whether a company would be deemed part of the BVCA Portfolio should get in touch.

Who are the participating insurers?Partner Insurers include Chartis, QBE and Dual Corporate Risks. Broker communications should have been received by key contacts within your organization and are available on the BVCAIS website (www.bvcainsurance.com). If you would like to be added to the distribution list for regular updates, please email [email protected].

Are there any more insurer deals insurers in the pipeline?Yes, we are in discussions with a number of insurers regarding further Partner Insurer deals as well as specific products under the BVCA banner.

How should I communicate any discounts or benefits on the quotation to my client?Partner Insurers have committed to identify the discount that is given on the quotation that they provide. This information should be reflected in your onward quotation to your client.

Will my client be aware of BVCA Insurance Services and the discounts available?In some cases BVCA IS will be working with the relevant Member and/or investee company and as such they would be aware. If this is not the case, we would ask you to notify us in order that we can track the activity and record data.

Who should I contact for further information?Feel free to contact the BVCAIS team with any questions at [email protected] or visit www.bvcainsurance.com for more information.

“We have created the concept of the ‘BVCA Portfolio’ whereby Partner Insurers have agreed to view the insurance spend of BVCA Members and their investee companies as connected. Through the leverage of this connected spend, we have been able to produce beneficial terms.”


Coverage Features Include:

• Cover available to any company in which a BVCA Member is invested

• Limit of liability up to £20,000,000 per policy (higher limits may be available on request)

• Nil excess outside US/Canada

• Nomajorshareholderexclusionasstandard

• Reinstatement of limit/Additional limit for investor appointed Directors

• Lifetime run-off for retired directors

• Employment practice cover for individuals

• Regulatory crisis response cover (sub limited)

• Outside Directorship cover

• Pre-agreed policy run-off provisions on acquisition

• 24/7 Helpline for Directors

• No insured versus insured provision (outside US/Canada)

• No pollution exclusion (industry dependant)

• Full cover for investigations

• Wide definition of “Director”

Note: Each policy will be undertaken on a case by case basis and term may vary.

Below is a Q&A featuring questions asked by Members and investee companies during the research and development of the Facility which we hope you will find useful:

Why did you decide to focus specifically on D&O?D&O Insurance is a particular focus for our Members and their investee company management teams. Given the significant number of D&O policies available in the market (currently in excess of 40) there is a clear need to establish a high “standard” level of D&O coverage.

What has been the feedback other Members?Through our research* we established that, due to their specific needs, Members and investee companies would welcome a ‘kite-marked’ wording which could be deployed across their portfolio allowingtheirinvesteecompaniestoenjoyahighbaselinelevelof coverage.

What were the specific findings of the research?a) D&O policies vary greatly between different brokers/insurers.

b) Premiums seem to vary and Members don’t always feel that best price is achieved.

c) Members would like to be able to access this “kite-marked” or minimum standard coverage for a BVCA Member backed company through any insurance broker, not be under pressure to move advisor.

d) Some Members would like more overview of the D&O policies purchased by their investee companies.

How would the BVCA Facility find a solution to these points?a) The BVCA Facility offers bespoke wordings designed for

private equity backed companies. Proprietary wordings offered by brokers can also be used to place business into the Facility as long as they meet the BVCA coverage standards.

b) The BVCA Facility is able to offer competitive premiums by grouping together, under one scheme, companies which have the commonality of being PE/VC backed.

c) The BVCA Facility can be accessed by the vast majorityof brokers, ensuring there is no requirement for investee companies to move broker.

d) The BVCA D&O Facility gives Members comfort through setting minimum coverage standards and oversight.

How do the brokers access the BVCA Facility?Brokers access the BVCA Facility via BVCA Insurance Services.

BVCA Portfolio Company D&O Facility

BVCA Insurance Services has established a Directors’ and Officers’ Liability Insurance Facility for the benefit of BVCA Members and their investee companies. The Facility, which can be accessed by all insurance brokers, provides high quality coverage specifically designed for private equity backed businesses.

BVCA


BVCA BVCA Portfolio Company D&O Facility

Who are the insurance markets backing the facility?The facility is backed by highly experienced reputable insurers with a minimum A+ rating.

What would happen in the event of a claim?Claims are notified in the normal way via brokers to insurers.

Our current D&O policy is already placed with one of your Partner Insurers, will we automatically get the BVCA wording at renewal?You are entitled to use the BVCA Facility and access the BVCA Wording, your broker can access the Facility at your request.

Is the Facility priced competitively?Yes, our Partners Insurers are committed to providing competitive premium terms both at inception and renewal.

Do investee companies accessing the Facility have to pay an additional charge?No, there is no charge for accessing the facility.

What do we need to do next?To ensure your company gains access to the BVCA Facility and BVCA wordings, contact BVCAIS and your broker to advise that your company is eligible to access the Facility prior to the renewal of your policy (it is good practice to give your broker 30-60 days notice prior to renewal).

*Research Sample – 34 Members

“Members and investee companies would welcome a ‘kite-marked’ wording which could be deployed across their portfolio allowing their investee companies to enjoy a high baseline level of coverage.”


INTRODUCTION Xxxxxxx

If a risk can’t be addressed ‘off the shelf’, we’ll build a solution. At Chartis we

take time to understand and manage the risks that confront a business and offer

wide and innovative covers that meet previously unmet needs.

Learn more at www.chartisinsurance.com

At Chartis we’re not afraid to innovate

WE’LL FIND A WAYor make one.

Chartis Insurance UK Limited is authorised and regulated by the Financial Services Authority (FSA number 202628). This information can be checked by visiting the

FSA website (www.fsa.gov.uk/register). Chartis Insurance UK Limited is a member of the Association of British Insurers. Registered in England: company number 1486260. Registered address: The Chartis Building, 58 Fenchurch Street, London, EC3M 4AB.


INTRODUCTION Xxxxxxxx

BVCA Guide to InsuranceOPInIOn

Sponsored by


3i have invested in insurance businesses in the UK, Germany, France and as far afield as Asia. How and why did this become a focus area?3i has a long and successful track record in financial services generally, and insurance in particular. The insurance industry is large and increasingly global, with annual premiums in excess of $4tn, split roughly into 60% life insurance and 40% general insurance. The future in the West (more mature economies) is increasingly about specialism and client service (examples include 3i-backed Hyperion), with the opportunity to build scale in well-invested businesses to deliver this as efficiently as possible and to deliver purchasing power through scale. In the East (developing economies), the model is one of increasing sales of insurance products through greater awareness, driven in part by increasing regulation and in part by the requirement to provide better economic protection as companies compete on the world stage.

Structurally the insurance industry is interesting. M&A activity has continued, albeit at a lower level, through the downturn. The insurance cycle has historically been somewhat counter-cyclical to the economic cycle, though it remains to be seen whether this will be repeated in the current market.

Is there anything that stands out about the sector from an investment perspective?It’s a wonderful sector because it is people-led and its trading nature generates genuine entrepreneurs looking to build and differentiate their businesses. Add private equity skills to that environment and you create a powerful combination.

Prior to your investment in Hyperion, what was 3i’s track record of investments in this sector?3i has a long history of investing in insurance. A notable recent success was Smart & Cook, where 3i invested in 2004, made 14 successful acquisitions, and sold to Axa UK plc in 2007, making in excess of three times our original investment. In 2006, 3i invested $200m into Asia Capital Reinsurance (ACR), a $620m property and casualty reinsurance start-up in Singapore, spotting a gap in the market for a well-backed management team in the

Asian market. This business has been very successful and is one of 3i’s top ten investments.

And more recently?During the summer of 2009 we backed Hyperion in acquiring Hendricks & Co, a leading D&O broker in Germany. This brought Michael Hendricks into the Hyperion group and has given Hendricks, via Hyperion’s global platform, the ability to win and service international clients. Hyperion, in turn, is now the leading independent D&O broker in Germany.

What does 3i seek to bring other than pure capital injection?At 3i, we work closely with our investee companies, sitting as Non Executive Directors on their Boards, and working real-time to drive strategic value creation and to help them become best in class. We achieve this latter part through our Active Partnership programme, working with companies to identify key operational levels for growth and profit, and introducing the right people and expertise to help move those companies from ‘good to great’. Many of the businesses we invest in are international, with the 3i global footprint and network a key differentiator, available to our investee companies. For example, we have worked with Hyperion on establishing operations in Dubai and Asia, and are working with them to assess and execute further acquisition opportunities on an international basis.

Dual Corporate Risks has 16 International offices. Has Active Partnership been able to help there?Dual has a fantastic senior team, from Chairman Bob Van Gieson right down to each of the main country heads. Dual is a leading underwriter in the UK for the private equity industry – both for investee companies and for private equity directors themselves, looking for umbrella policies. It is great to see that Dual is a key partner with the BVCA for the new insurance initiative. 3i is working on an ongoing basis with Dual – both in terms of helping with new market launches (most recently in Ireland and Hong Kong) and also with respect to capital

Investing in the Insurance SectorOPInIOn

“As a private equity investor I am very interested in the quality of insurance coverage, breadth of cover and the specific terms for our investee companies, with a particular focus on their D&O policies – because it’s personal.”


OPINION Investing in the Insurance Sector

providers (we have a strong working relationship with Arch, for example), and wider portfolio initiatives – expect to see more announcements in due course.

Enhanced purchasing power is clearly a tool that 3i has embraced. What steps have you taken?There are relatively few things that you can procure across businesses which are genuinely sustainable and can deliver significant profit benefits. One that stood out was helping companies with insurance. 3i have a well publicised partnership with Aon who run our portfolio insurance programme and, quite naturally, Aon also has a strong relationship with Dual and the widerHyperiongroup.Intermsofinsurance,itisnotjustaboutpricing, it’s about risk mitigation and making sure businesses have the best advice in order to help them assess and manage their risk, which in turn helps lower insurance premiums. For 3i, it’s about having trusted partners that help us with diligence on new deals, that we trust to look after our investee companies if they ever have to make a claim, and that can manage and deliver savings through block placing of the portfolio’s insurance. It is a long-term relationship as it takes time for a portfolio initiative to work as companies have different renewal dates, different risks and, often, multi-year policies in place.

Do you take an interest in insurances of your investee companies?As a private equity investor I am very interested in the quality of insurance coverage, breadth of cover and the specific terms for our investee companies, with a particular focus on their D&O policies – because it’s personal. It is a complicated area and broking expertise is essential to get the right policy. You cannot justbuyavanillaD&Opolicybecauseitiscriticalthatitistailoredto the specific director roles it is there to cover.

Insurance premiums appear to have been relatively static in recent years. What is your take on this?The insurance cycle has been soft for longer than many expected. There is still a lot of capital in the market and underwriters had a benign year last year with no catastrophe losses large enough to move rates. Investment income is very low, however, and at some point I would expect rates to harden as capital flows out of the market, likely triggered by a bad hurricane season or similar.

Are more investments in the insurance sector likely for 3i?Yes, definitely. 3i has deep insurance sector knowledge and experience and there are clear opportunities out there, particularly in those businesses that own their own distribution, have niche specialisms and the technology to differentiate their cost of delivery and service. Many successful players also generate earnings from non-insurance products or ancillary services which gives them attractive earnings resilience and a platform for growth. The successful 3i track record in the sector is something we are keen to continue.

BiographyGordon Hague is a Director in the Growth Capital business, investing up to €150m for minority stakes in market leading businesses. Over the last 12 years he has specialised in originating and investing in private companies seeking to accelerate their organic and acquisitive growth, both in the UK and across Europe.

He worked in North West England and Central Scotland before moving to London in 2004. He has led and played a key role in a wide range of investments including ARM Services, Magic4, Local Press, Canvas Holidays and recent Telecity transactions. Recent investments have included Hyperion, AES Engineering and MKM Building Supplies.

Prior to 3i Gordon spent five years with Arthur Andersen. He is a Chartered Accountant and has a degree in Biochemistry from the University of Bath.

[email protected]

About 3i3i is an international investor focused on buyouts, growth capital and infrastructure, investing across Europe, Asia and North America.

For over 60 years we’ve invested in supporting people who start, grow, change and buy businesses; delivering significant power to the people we work with through our knowledge, experience and global network of relationships.

Ultimately, we’re driven by our strong sense of values. We form close partnerships with the companies we invest in and we build strong relationships based on integrity, trust and mutual respect.

Our competitive advantage comes from our international network and the strength and breadth of our business

relationships. These underpin the value that we deliver to our

portfolio, shareholders and fund investors.


The headlines from such publications as the Wall Street Journal, ‘Hackers Mount New Strike’ (Feb. 18, 2010) and USA Today, ‘Stolen Logons In Hands of “Amateurs”’ (Feb. 19, 2010) all tell the same story: hackers are mounting new attacks.

The Wall Street Journal article detailed the findings of a computer security company that hackers in Europe and China had successfully broken into computers at more than 2,400 companies and government agencies during the past 18 months in a coordinated global attack. It exposed vast amounts of sensitive personal and corporate information from credit card transactions, corporate trade secrets, contracts, presentations and source code of new products.

Hackers use various methods to break into personal and corporate systems:

• Social engineering ruses designed to trick employees to click on contaminated websites, e-mail attachments or seemingly innocent ads.

• Use of ‘botnets’ – A collection of compromised computers that are controlled by the same hacker that is slowly built up and then unleashed as a denial of service attack, used to send spam or commit some form of computer crime. One security researcher reported that there are 2,000 botnet gangs that together control five to seven percent of PCs in corporate settings in North America.

• Spyware infections such as ZeuS, or other forms of malicious code (malware).

As outsourcing and off-shoring of IT and other business functions continues, the risk of significant security breaches by vendors who host, process, store or handle customer and employee personal financial or healthcare data rises. Many corporate executives mistakenly believe that by outsourcing the work to vendors, they

have also transferred the liability that may arise from a data breach or system failure. Unfortunately, this is not the case.

Privacy and security risks definitely should be managed as a high severity risk management issue – involving claims, investigations and costs, but also loss of reputation and customer trust. In the U.S., privacy violations and security breaches can result in civil lawsuits, frequentlyclassactions.Someinternationaljurisdictionsmaintainstringent laws and regulations especially related to privacy, e.g., E.U. Data Privacy Directives.

Nearly every US state has passed laws that call for organizations holding non-public personally identifiable information (PII) to notify the affected persons if their information has been potentially compromised, whether it occurred directly or indirectly through vendors. For healthcare providers and their business associates, there is also the federally required notification regarding personally identifiable healthcare information (PHI).

A multifunctional approach to IT security that involves the risk manager/insurance manager, legal department, compliance, internal audit, procurement and operations is usually the best way to define activities and services that involve PII and/or PHI. The group should Determine current state of risk prevention and mitigation anddevelopeffectiveprojectstoimprovetheseeachyear.Duringthat process, the following questions should be resolved:

• What systems store PII and/or PHI?

• What would be the aggregate potential if such data were breached? Consider not only electronic data, but also paper records that contain PII/PHI.

• Which outside vendors or business associates have access to PII and/or PHI?

• What due diligence has been done to determine the state of vendor security and privacy controls?

Preventing Cyber Theft

As more and more companies around the globe respond to compromises around the amounts of sensitive personal information they hold, variations on a dusty old theme are heard over and over in the media and elsewhere: ‘When America sneezes, the world catches cold.’ Hackers, viruses and loss of information are more frequently hitting the headlines and companies are being taken to task for their lack of risk management and structured controls to protect their clients and employees. With the vast number of investee companies held by private equity firms around the world, this is an issue which is not going to go away and as will be seen from the below, the US has taken stringent action to deal with the problem. It cannot be long before the UK follows suit.

OPInIOn


OPINION Preventing Cyber Theft

• What has been done on vendor contractual controls and insurance requirements?

• Are my ‘high risk’ vendors (e.g. credit card processors) in compliance with industry standards?

• Are our physical and technology tools (anti-virus, IDS, etc.) up to date?

Other tips to help guarantee a plan is comprehensive include:

• Make sure you have staff security training and awareness, background checks, filters and controls of employee usage of the Internet in place.

• Ensure there are no unauthorized Internet peer-to-peer (P2P) file-sharing programs on their network and that authorized programs are properly configured and secure internally. Avoid emailing PHI/PHI in the clear or via unsecure P2P programs.

• Put a structure in place to handle internal testing and controls, periodic external scanning, penetration testing and process/control audits.

• Hire external security partners with experience in your industry.

• Develop a patch management strategy and fix high-risk vulnerabilities promptly and patch all your servers.

• Make sure all sensitive data is encrypted – not only of PII or PHI at rest on your systems, but also in-transit or on mobile devices (laptops, tapes, USB pens, etc.).

• Most importantly, develop a security breach incident response plan, particularly if your company accesses, processes, manages, stores or handles PII and/or PHI of third parties.

Be aware that security laws and regulations are not static – and that new legal and regulatory developments occur at a state and federal level. In theU.S., there aremajor regulations regardingmedicalprivacy/security (HIPAA/HITECH) and financial information privacy/security (Gramm-Leach-Bliley). An effective way to keep on top of these regulations is the website of the International Association of Privacy Professionals: www.privacyassociation.org.

About the AuthorsRoger Curtis – Executive DirectorRoger works within the Financial Risks team in London and is responsible for the business development of UK and European retail financial institutions.

Roger has worked within the financial sector for over 20 years wherehehasenjoyedsuccess inanumberofroles.PriortojoiningMarshheranhisownfinancialservicesbusinesswhichhesoldin1998.AtMarshhemanagedandadvisedmajorUKfinancial institutions including Lloyds TSB, Legal & General andFlemingFamily&Partners.RogerjoinedLocktonin2008having worked with Marsh for six years.

[email protected]

Brett Warburton-Smith – PartnerBrett has 20 years insurance experience.

He is Partner at Lockton having joined fromAon andpreviously

Marsh. Brett now heads up and is responsible for client development at Lockton, focusing specifically on financial institutions and professional service firms.

Starting his insurance career as a political risk underwriter with Euler Hermes in 1990, he moved

to Amlin Credit, a Lloyds syndicate, where he was promoted to board

director and then to Marsh where he led sales in the financial and professional sectors. Experience in general insurance, captives and for the last eight years within professional liability and Directors and Officers insurance has enabled him to really understand the commercial and insurance challenges that clients face in theirdaytoday lives.Brett joinedLockton inJanuary 2008.

[email protected]

About LocktonFounded in 1966 Lockton is the world’s largest privately owned insurance broker with offices in 49 countries and revenues in excess of $800m. We provide risk and insurance services to all types of companiesacrossalljurisdictionsand territories. Our International business is Headquartered in City of London (14 offices in the UK). At Lockton we deliver an unrivaled level of service, our private ownership and Partner led business model allows us to put our clients at the centre of everything we do.


What is Global Limits Manager?Global Limits Manager (GLM) is an internet based trade receivables management solution that uses a company’s own trading experience to:

• constantly monitor a customer portfolio for signs of payment delinquency

• set realistic customer credit limits

• dynamically predict how much cash a company will receive over the next few days or weeks

• provide real-time management reporting of overdue accounts, credit risk aggregations and changes to customer risk profiles.

Global Limits Manager works by connecting a company’s accounts receivables system directly to our central servers and then taking a daily automated feed of all customer, invoice and payment details. GLM then processes this data in a secure and confidential manner, providing the company with unparalleled intelligence about its accounts receivables asset.

Who uses it and what does it cost?The Global Limits Manager product is aimed at credit management specialists, finance executives and business owners, providing solutions for:

• credit risk management, by helping credit professionals manage customer credit risk, track customer delinquency and target collections activity

• treasury management, by providing finance executives and businessownerswith‘real-life’adjustedcashforecasting

• credit limit management, by automatically setting customer credit limits based purely on customer payment experiences and supplemented where necessary with D&B data.

Global Limits Manager is suitable for use by most medium to large sized companies, trading on credit terms with an active portfolio of over 250 customers. Global Limits Manager can be used by companies operating in any business sector, trading either domestically or internationally.

Global Limits Manager is charged on an annual subscription basis where the fee is dependent on the number of A/R systems we need to connect to, the total number of customer accounts to be loaded and the amount of D&B data required.

GLM & Trade Credit Insurance Many companies use trade credit insurance to protect themselves against the risk of customer insolvency or protracted customer payment default.

Global Limits Manager has been designed to seamlessly interface with a Chartis trade credit insurance policy, providing Chartis policy holders with approved credit limit management below a policy discretionary limit and easier policy reporting and operational compliance.

GLM & Trade FinanceCash and working capital are the lifeblood of any company and the accounts receivables asset is often used as a means of acquiring external funding or trade finance.

Global Limits Manager can be used by companies and trade finance providers alike as a means of automatically producing the real-time invoice eligibility reporting required to support a trade finance programme. With its automated, portfolio-wide credit limit management capabilities, Global Limits Manager often widens the customer borrowing base, potentially resulting in higher levels of available funding at more competitive borrowing rates.

Global Limits Manager

The fear of credit default haunts companies now as much as any time in recent history. However, the traditional tool of the credit manager has been the status agency report, which is largely an analysis of the latest filed financial information on a business in the public domain. The difficulty with this is that events have moved so swiftly that correctly filed accounts may well refer to a period of trading prior to the current turmoil. A novel and valuable solution to this dilemma is the introduction of Global Limits Manager, which takes a daily feed of current sales ledger experience to provide an immediate and relevant credit limit on each buyer.

OPInIOn


OPINION Global Limits Manager

GLM & ChartisGlobal Limits Manager has been developed by Aronova Ltd specifically for Chartis, and represents the cumulative experience of many years of knowledge from both companies, dedicated to providing superior methodology for the control and management of credit risk from an underwriter’s point of view. It is not a replacement for the myriad credit management systems that comprise the market, but rather a complimentary platform that sets out to define limit setting criteria based primarily upon actual trading experience. Whilst a large part of credit management is dedicated to recovering sums due from open account trading, GLM uses actual trading experience in a predictive manner to anticipate and control future commitments.

The value of GLM both to clients and to underwriters is that at last an automated system of setting credit limits using up-to-date trading experience as well as status information now means that allpartiescansetdefinedparametersforthecreditrisk.Majorexposures/aggregations can be set by manual intervention from theprofessionalunderwritingteam,butthevastmajorityofdailyinteraction between client and underwriter is now systemised with reduced costs for all. It also brings visibility to the debtor portfolio right down to an individual, granular invoice level and introduces contract certainty into a class of insurance which has suffered in the past fro a perception that underwriters had the opportunity to avoid paying claims because of the contingent nature of the contract.

The value of GLM is only now being fully realised as its use extends into captive management, as well as being used to set eligibility criteria in trade receivable financing structures. The value of the daily data being accumulated within GLM is likely to setnewstandards for credit risk judgements, and thedailyreporting structure avoids the usual challenge to status agency data that it is often out of date because of the inherent delays in the public filing of financial information.

About the AuthorNeil Ross is the Profit Centre Manager for Chartis Trade Credit. After graduating from Cardiff University, Neil joined TradeIndemnity PLC (now Euler Hermes) where he became Export UnderwritingManager.In1994hejoinedHiscoxtoestablishTrade Credit as a new class of business at Lloyds and he became lead underwriter from the Trade Credit Market facility.

HejoinedAIG(nowChartis)in2000wherehenowheadsTradeCredit for the UK and Ireland which has grown to become the third largest Credit Insurer in the UK. Neil has played a leading role in the establishment of Chartis Trade Finance Limited where he is Chairman.

[email protected]

About Chartis InsuranceChartis Insurance UK Limited is one of the UK’s largest general insurance companies. With offices throughout the country, we provide innovative products and services to more than half the country’s top 1000 companies as well as many public and

private sector organisations and millions of individuals. We are part of Chartis Inc.,

a world leading property-casualty and general insurance organisation with a 90-year history, serving more than 40 million clients in over 160 countries and jurisdictions.

Chartis offers an extensive range of products and services, deep claims expertise and excellent financial

strength. Chartis Insurance UK Limited is authorised and regulated by the Financial Services Authority.

“Cash and working capital are the lifeblood of any company and the accounts receivables asset is often used as a means of acquiring external funding or trade finance.”


What is the relevance of ML insurance for private equity firms?The liability exposures faced by private equity firms occur throughout the lifecycle of a fund. It is, therefore, important that protection is arranged against all potential liabilities - from the initial fund-raising through to the ultimate returning of those funds to investors. This lifecycle can be divided into four distinct phases, each with a specific set of exposures:

• Fundraising• Investing in portfolio companies• Portfolio management• Exit

Marsh tailors solutions which protect against specific risks faced by a private equity firm. This often calls for a blend of the following insurance solutions:

• Directors’ and officers’ liability (D&O)• Outside directorship liability• Professional liability• Employment liability protection• Crime protection.

What ML insurance issues should portfolio companies be aware of?Portfolio companies commonly renew their insurance with the same limit and programme structure as previous years and rarely consider any changes in circumstance that may make it prudent to re-assess the limit purchased.

A very specific risk profile exists for a portfolio company between third parties and the private equity firm. It is crucial that the portfolio

company has a tailored private equity ML policy that will respond to these specific circumstances. Even a good quality commercial ML policy may fail to pick up the nuances around a private equity business and leave the business potentially exposed to claims that can be covered through using a bespoke private equity wording.

Marsh has bespoke private equity wording which is unique in the marketplace and benefits both the private equity firm and the portfolio company. It provides specific enhancements and clarification on how the policy will respond in the event of a claim.

Inconjunctionwith thisbespokewording,a rangeof toolshasbeen developed to enable a qualitative assessment of the existing policy to be made. This enables any fundamental gaps in coverage to be addressed, whether mid-term or at renewal.

IPO’s are hot news at the moment – how does a public offering affect a ML insurance policy?An area of insurance that should be considered is for the actual offering document at the time of the initial public offering or capital raising. Signatories of a public prospectus for a securities offering have a personal responsibility for its contents and could, therefore, be found personally liable for the losses of securities’ holders arising from omissions and misrepresentations within the prospectus.

It is very common on a flotation for directors and officers to give personal warranties about the prospectus to the underwriter or the sponsor of the flotation. Such warranties made outside their capacity as a director or officer are normally specifically excluded from coverage under the ML policy. Consequently in the past few years it has become increasingly common for the underwriters, sponsors or venture capital providers to ask directors to have a public offering of securities insurance (POSI) in order for both

Management Liability Insurance

Management Liability (ML) Insurance provides directors and officers with cover for any legal liability that they may incur personally when managing a company.

A heightened awareness of corporate accountability means that the roles and the responsibilities of private equity firms have increased substantially. This is especially true for the personal liabilities of directors and officers, both at investor and portfolio company level.

Traditionally, many directors and officers have relied upon indemnities given by their companies to protect them and their personal wealth. However, if a company becomes insolvent – an increasing risk in the current economic climate – these indemnities may be worthless. Directors and officers need to be very clear about what their policies cover and mindful of any potential gaps or pitfalls.

OPInIOn


OPINION Management Liability Insurance

them and the company to be able to meet any potential claims made against them.

Some potential risk exposures include:

• Alleged errors, omissions, misstatements, and non-disclosure in the listing offer document

• Stock exchanges requirements when preparing for an offering• Enhanced corporate governance responsibility• Increased regulatory scrutiny• Insider trading post offering.

ML policies may cover some of the claims that may arise but they are not designed to address all the risks arising out of a prospectus and listing process.

Often policies do not cover claims against the company by a third party and they are unlikely to cover liability under warranties and indemnities given in a personal capacity, as opposed to in their capacity as a director or officer. The ML policy was put in place to cover the ‘normal’ operations of the company and, as such, the limit chosen in this regard may not be sufficient for the increased liability of a public offering.

A company should think carefully about allowing their limit to potentially be eroded by an event pertaining to the offering and so a separate policy designed to cover the transaction may be the most appropriate step.

Finally, although the ML policy can be endorsed to cover

many elements of the prospectus upon negotiation, cover can potentially be changed at each renewal which eliminates uncertainty in terms of coverage and cost. Unlike ML, POSI is a six-year non-cancellable policy and therefore is non-renegotiable on a yearly basis by insurers.

What sort of claims would you expect to see in this sector?Private equity firms and their portfolio companies are open to claims from a wide source of claimants alleging a variety of wrongdoings.

Our experience tells us that claims against the private equity firm are most likely to come from the following groups; minority shareholders, portfolio company (directors, employees or the company itself), liquidator, creditor, dissatisfied bidder, deal originator and former private equity partner.

These claims may be in relation to one of more of the following issues; breach of fiduciary duty, employment practises, breach of contract, securities fraud, misrepresentation and fraud.

Our experience also suggests that claims against the portfolio company are most likely to come from; shareholders, regulator, liquidator, employees, M&A and stakeholders.

These claims may be in relation to one of more of the following issues; insolvency, regulatory investigations, insured versus insured claims (intra-shareholder disputes), corporate transactions and employment practises.

About the AuthorsDaniel MaxDaniel Max is a Senior Vice President in Marsh’s Private Equity (PE) and M&A Practice. He co-leads the UK Practice and has extensive experience in all matters relating to PE investment and exit. This includes the structuring of specific solutions to remove specific transactional liabilities and the development of private equity insurance portfolio procurement strategies.

[email protected]

James ConveyJames Convey is a Vice President in

Marsh’s Financial and Professional Risks (FINPRO) division. He

specifically focuses on the Private Equity sector where he advises a number of private equity firms and portfolio companies.

[email protected]

About MarshMarsh is the world leader in delivering risk and insurance services and solutions to clients. It provides insurance broking, risk management, risk consulting, alternative risk financing and insurance programme management services for businesses, public entities, associations, professional services organisations, and private clients globally. Marsh is organised by client, industry, and risk categories to facilitate the global delivery of highly specialised products and services covering a wide spectrum of risks.

Marsh is strengthened further by being part of MMC, the premier global professional services firm providing advice and solutions in risk, strategy and human capital. Through MMC’s market leading brands, over 55,000 colleagues in more than 100 countries help clients identify, plan for and respond to critical business issues and risk.


What is insurance due diligence?The due diligence exercise involves a detailed look at the insurance and employee benefits situation of the target acquisition to ascertain and evaluate any severe problem areas that could lead to serious price influencing factors or that, post completion, could hit the balance sheet of the investee company. The due diligence is a platform for solution and problem solving.

The insurance and employee benefit programmes of both national and multi-national organisations can be complex and expensive, with hidden obstacles and pitfalls that can prove expensive for either a seller or buyer to resolve. For example:

• Sectors – some sectors cannot obtain sufficient traditional insurance capacity at economic cost, leaving considerable areas of risk unprotected e.g. automotive product recall; tobacco liability; earthquake and other natural hazards in high-risk zones.

• Legaljurisdictions–therecanbenumerouslegaljurisdictionsand insurance regimes that apply across a multi-national programme. These include the requirement to purchase insurance locally from companies whose security is not acceptable to lenders; retrospective changes in legislation produce unexpected historical liabilities (environmental impairment liability is a good example of this); different tax treatments for premiums producing unexpected additional local tax charges; and different employee benefit regulations in each territory.

• Insurance related liabilities – there may be liabilities that are under-funded e.g. deductibles that are under-accrued; captives; and insurer mandated risk improvement requirements that are unbudgeted.

• New territories – there are risks associated with moving into a new territory. For example restitution risks in Eastern Europe; government nationalisation of foreign owned assets; local insurance standards may not meet the requirements of western debt providers e.g. business interruption is not traditionally bought in much of central and eastern Europe.

• Employee transfers – facilitating the transfer of employees to different countries has an impact on pension plans when

expatriates have to comply with local legislation whilst also being acceptable to the employee as tax efficient.

The aim is to seek out these potential problems and to develop and deliver a solution.

How can Aon Mergers and Acquisitions (AMAG) provide support?Any of the above examples could cause a deal or fund to suffer unexpected cash flow or collateral issues. Identifying and quantifying the issues will provide the buyer with ammunition in a deal negotiation that could result in an improved price, a better auction negotiating position and avoid future value reduction in the target.

AMAG can provide bespoke insurance solutions when issues are identified during the due diligence process. These solutions can be utilised during deal negotiations to enhance the position of the buyer or seller and can increase the value of the investment. Examples of when this has been done are:

• Tax – during a secondary buy-out an issue relating to the tax treatment during a previous company restructuring was identified. There was a risk of the tax authorities alleging the restructure was purely a tax reduction mechanism and charging additional tax. This was not a risk the buyer was prepared to accept. The solution was a one-off insurance policy that covered the potential additional tax liability and defence costs. This allowed the PE seller to make a clean exit and the buyer had no risk.

• Litigation – following insurance due diligence, an outstanding liability for litigation relating to a US class action was discovered. Although the claim was covered by the liability insurance policy, and the sellers were confident of a successful defence, US specialists advised that the potential damages exceeded the liability insurance cover limits by GBP150m, which represented 50% of the purchase price! An insurance policy was arranged that transferred to insurers all the responsibility of negotiating the claim and all the potential liability should the defence not be successful.

• Pensions – A client identified that the target had a significant pension deficit and was concerned about the attitude of the

Insurance Due Diligence

Insurance and employee benefits due diligence is an important part of the deal process, to discover hidden costs and liabilities. Additionally, insurance solutions can be used as a strategic tool to help add value to a transaction throughout the deal and fund cycle.

OPInIOn


OPINION Insurance Due Diligence

pension fund trustees to the new ownership and the need toput a large cash injection into thepension fund at thetime of the purchase. A pensions security indemnity was purchased which provided security for pension schemes through injectingcashshouldthecompanydefaultonthescheme. The product is fully compliant with the regulatory guidelines on contingent funding. The trustees were satisfied and the buyers were happy that the problem had been resolved without the need to post valuable assets, cash or credit facilities as collateral.

Various solutions have been developed by Aon to meet the needs of our clients. For example:

• Where administrators who will not provide warranties are selling assets, warranty and indemnity insurance can be used to replace missing warranties so increasing the value of the asset or providing buyers with additional security.

• Portfolio value audit – detailed analysis of current insurance programme of a portfolio company to identify costs savings and cover deficiencies.

• Use of credit insurance or receivable management tools / consultancy to assist in bad debt management in portfolio companies.

• Investigative due diligence – due diligence reports on individuals and/or management teams of prospective investment targets, to allow clients/investors to feel more confident about the targets and individuals they will ultimately be partnering with.

AMAG continues to work with insurers to develop new products, so it is always worth asking if a bespoke solution for a deal impediment or fund issue can be developed.

About the AuthorPeter M Casciani, ACII, CIP.

Peter started his career in insurance in 1986 with the Commercial Union joining their graduate intakeprogramme. In 2001 he left Commercial Union to joinAlexander Stenhouse, an Aon legacy company, in the role of development executive working in both Edinburgh and Glasgow. His later focus was financial institutions and private equity. Peter then set up and ran Aon’s regional M&A practice outside of London completing his first private equity deal in 1986. In 2001 he moved to Aon’s London office to work in its M&A team. Currently Peter is the co-head of Aon’s largest European private equity client focusing on its due diligence operations as well as portfolio management. In his career Peter has completed over 400 transaction across the globe. Peter is married with two young children and his external interests include Formula One and blues music. In his spare time he collects guitars, watches and antique maps.

[email protected]

About AonAon Corporation is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its 37,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions.

“The insurance and employee benefit programmes of both national and multi-national organisations can be complex and expensive, with hidden obstacles and pitfalls that can prove expensive for either a seller or buyer to resolve.”


The problem is, pensions are notoriously complicated, the rules surrounding them change time and time again, the technicalities can be unnecessarily convoluted and the language used is often confusing.

Pensions are usually an employer’s biggest benefits spend and to ensure value for money, it is essential that the employees fully understand and appreciate the scheme. However, for employees to appreciate the pension, they must firstly understand how it works, so the complexities that surround pensions need to be removed.

Retirement shouldn’t be stressful; it should be a rewarding and enjoyabletimesoplanningisvital.Inordertoplanretirement,people need to have an understanding of pensions and the best way to learn something is through education.

Employers wanting to get the best value from their pensions could focus on providing their employees with education and guidance about the scheme, in a language they understand, so they are able to make well informed decisions in respect to their own retirement planning.

However, there are fine lines between financial education, guidance and advice. Employers must not allow themselves to be put into a position where it could be construed that they provided an employee with any form of financial advice. Therefore, the responsibility of providing financial education to employees should be left to the pension scheme administrator.

From the employer’s point of view, the trick is to find a pension administrator, who is regulated to give financial advice, specialises in providing financial education and has a track record of keeping things simple. After all, the basic idea of a pension is simple. You (or someone on your behalf) puts money away during your working life, so that when you retire you will have an income to live on instead of your salary.

The truth is that it hasn’t been kept simple. The evidence of this are the high numbers of employees in the UK who have chosen not to join their employer’s pension scheme. To counteractthe lack of savers, we now find ourselves in a position where

automatic enrolment of employees into pensions is to be forced upon companies across the country.

But it doesn’t need to be complicated. A Defined Contribution pension is a long-term savings plan; a way of building an asset for the future. The bigger your asset, the more money you’ve got to generate an income in retirement – that’s it really. With any asset building tool, whether it be a bank account or money under the mattress, the idea is to build as much money as quickly as possible at least cost to the individual.

Now imagine a Defined Contribution pension scheme where an employer matches an employee’s personal contribution and employees can make contributions via salary sacrifice. A basic rate taxpayer would see a net monthly contribution of £69 turn into a monthly investment of £200 after income tax relief, NI savings and the employer’s contribution are added. If the employee decided to invest that £69 anywhere else, it would need to grow by 190% to get to £200.

For those employees who have access to a pension scheme where the employer contributes, it is the best way for them to build an asset for their futures. However, this needs to be communicated and explained to them in a way that can be understood and not shroudedbytheusualjargon.

This is why we’ve made it our priority to effectively communicate company pensions as part of our core service proposition. We encourage a healthy take up of schemes and good value for money through the financial education we provide.

Pensions – Are They Really so Complicated?

In an environment where employers are increasingly turning to Defined Contribution pension schemes the need to simplify pensions is greater than it’s ever been before. Employees now need to make many more decisions in respect to their own pension planning; when to join; how much to contribute; where to invest their savings and what type of pension to take at retirement.

OPInIOn

“For employees to appreciate the pension, they must firstly understand how it works, so the complexities that surround pensions need to be removed.”


OPINION Pensions – Are They Really so Complicated?

About the AuthorDavid Hix has worked in the financial services sector for over 20 years. In 2001, David shifted his focus to the corporate pensions market, targeting employers who had historically engaged with fee based employee benefit consultants. He believed the traditional fee based model did not provide Defined Contribution pension schemes with value for money.

David has created a management team, who specialise in delivering advisory and administrative support to pension schemes. I would best describe the team as passionate, professional, personable - our enthusiasm for pensions is infectious and unrivalled. We pride ourselves on delivering advice in a language that truly demystifies pensions for all levels of employees.

[email protected]

About Jelf Group plcThe Jelf Group is an independent, full-service consultancy working with businesses and individuals. We are a client-focused organisation, specialising in providing insurance, healthcare, pensions, financial services and commercial finance

solutions. Our aim is to help you provide the best employee benefits for your staff whilst minimising the disruption to your organisation and saving you money in the long term.

Our approach is consultative as we like our clients to be fully involved. We’ll listen, examine and then advise; and when we’ve done that we’ll help you to implement and communicate your employee benefits package.

Jelf Employee Benefits areas of specialism are:• Pensions• Healthcare• Financial planning and

education• Benefit management• Employee protection

benefits

“It doesn’t need to be complicated. A Defined Contribution pension is a long term savings plan; a way of building an asset for the future.”


Conversely, there is also the need to consider the impact that the environment can have on your business. This goes beyond considering the implications of climate change risks on insurance, now and in the future. For example, as businesses assess the impactoftheeruptionoftheEyjafjallajökullvolcanoinIcelandand subsequent ash cloud covering European airspace, it has highlighted the necessity to also consider business continuity and supply chain implications for events which cause widespread disruption, but where there has been no property damage or insurable business interruption as such.

As a result of the progressive change in the understanding of environmental risks, there is a need for a more comprehensive approach to environmental risk management, which has brought a demand from business for broader cover from Environmental Impairment Liability (EIL) Insurance and the wider assessment of supply chains and business continuity. Furthermore, companies now have a powerful incentive to audit their sites and operations and to question whether they can adopt a more sustainable approach to reduce environmental impacts.

Following the incorporation of the EU Environmental Liability Directive (ELD) into national law, businesses must now ensure they do not cause damage to water, land or “biodiversity” – protected habitats or species. From an insurance perspective, this brings into focus the perceived ambiguity and limitations that can typically apply to cover for environmental risks under public liability and property insurances.

The ELD draws a much wider definition of environmental damage than in the past and a company can be deemed as having caused environmental damage as a result of its ordinary operations causing an adverse effect, as much as through a toxic spill.

Companies have a new obligation to notify the authorities

if they have damaged the environment. The new rules also require organisations to carry out much more comprehensive preventative and clean-up work than under any previous regime. They must not only repair the damage they have caused but will also have to rehabilitate the site back to its original condition. If that is not possible, or it will take a long time to complete, an organisation can be made to compensate for blighting that area – even to the extent of creating an alternative habitat or resource elsewhere.

We are in a brave new world where every piece of flora and fauna has its own individual value. The “complementary” and “compensatory” remediation provisions of the ELD create new liabilities for companies, particularly those operating within or near to environmentally sensitive areas. Now a site no longer ends at the boundary fence, it should consider the surrounding area. Also, operating processes don’t have to be obviously hazardous to be seen to be potentially environmentally damaging.

The EIL Insurance market has looked to broaden the cover provided by EIL Insurance policies to provide specific protection against potential liabilities arising out of the ELD. This has been part of the enhancement and development of EIL policy forms designed to align cover with the insured’s business activities rather than being tied to operations or projects at specificsites. The overall aim is to provide a broad scope of cover at affordable premiums and minimal readily-available information requirements.

Away from insurance, it is important for organisations to review risk management controls and communication capabilities in the context of the increasing uncertainty over how environmental issues can impact business. These processes and procedures need to be updated based on lessons learned from the air transport

Environmental Impact and the Impact of the Environment

As consideration of environmental risks in business continues to move up the corporate agenda, so the perception that a company’s environmental performance can be linked to its financial performance becomes more compelling. There is also improved understanding that environmental risks and liabilities are not solely those associated with issues such as land contamination. This includes greater consideration of operational issues associated with new environmental risks, such as the potential impacts of a business on biodiversity, and the need to adopt a sustainable approach to business.

OPInIOn


OPINION Environmental Impact and the Impact of the Environment

crisis stemming fromtheEyjafjallajökull volcanoeruption.Thisincludes events that could mean having fewer people in the locations required, losing the ability to conduct face-to-face business, and an inability to deliver or receive goods. This should form a part of an effective supply chain management and business continuity plan, which is a fundamental requirement for any business.

On the subjectof sustainability, it is accepted thatbusinessesneed to make money. The more profit that is made the better chance of prosperity for the future. But at what cost, to the environment and to society, is profit being made? This is the question being asked now by investors, regulators, customers and employees, and not having a good answer will be damaging to a business.

Evidence is mounting that business activities are influencing climate change and there is rising concern over the rapid rate of depletion of the earth’s natural resources. These issues have led to growing calls for change to conserve what remains of our natural asset wealth and to reduce environmental impact. Industry is the largest user of most of these limited resources,

“We are in a brave new world where every piece of flora and fauna has its own individual value. The ‘complementary’ and ‘compensatory’ remediation provisions of the ELD create new liabilities for companies, particularly those operating within or near to environmentally sensitive areas.”


OPINION Environmental Impact and the Impact of the Environment

and companies are under increasing pressure to explain the knock-on effect that their processes, products and services are having on the environment, and how they intend to change in order to reduce future impacts.

Environmental risks are now regarded as a business risk. Damage to the environment has crept up the list of the biggest threats facing society as tracked in the World Economic Forum’s annual assessmentoftheworld’smajorrisks.Inaddition,investorsareincreasingly aware that the businesses they invest in will be exposed to the effects of a changing climate and they want to know how businesses are responding. Companies now face a choice between tackling the issue of sustainability or risking investors deserting them.

Many of the world’s biggest investors and businesses with enormous purchasing power are taking action. For instance, manysupport initiativessuchastheCarbonDisclosureProject

(CDP) which aims to make organisations publicly report their own carbon footprint. Around 2,500 such organisations have already heeded the CDP’s call to reveal their greenhouse gas emissions and explain what they are doing to improve their overall environmental performance; we can expect more will do so in the future.

Put simply, sustainability is a growing consideration in ensuring the future success of business. With the increasing pressure on depleted natural resources and a greater level of scrutiny on environmental performance from policymakers and investors, it makes more sense than ever to fully understand the impact that a business is having on the environment and to make changes to business processes that are seen to be having a deleterious effect on the environment and society.

There are of course risks in adopting a more sustainable approach; soon the risks in choosing to do nothing may be much greater.

About the Author Nick Bennison has worked within the insurance industry since 1986. His experience includes 12 years as an underwriter for theGlobal andCorporate Risks unit of amajor compositeinsurance company. During this time, he held the position of senior liability underwriter.

Nick has worked within the specialist environmental insurance market since 2001. He combines his vast insurance industry experience and environmental science knowledge to provide advice on strategic environmental risk management and the design and placement of environmental insurance programmes for a broad range of industry sectors and projects.

Nick regularly contributes expert opinion to a range of publications. Recent comment has been provided for a Lloyd’s of London editorial on climate change and the insurance industry. The Met Office has consulted Nick for his views on information requirements for the impact of weather trends on environmental risks. Nick has also provided input to the BIBA committee considering the impact of the EU Environmental Liability directive.

[email protected]

About MarshMarsh is the world leader in delivering risk and insurance services and solutions to clients. It provides insurance broking, risk management, risk consulting, alternative risk financing and insurance programme management services

for businesses, public entities, associations, professional services organisations, and private clients globally. Marsh is organised by client, industry, and risk categories to facilitate the global delivery of highly specialised products and services covering a wide spectrum of risks.

Marsh is strengthened further by being part of MMC, the premier global professional services firm providing advice and solutions in risk, strategy and human capital. Through MMC’s market leading brands, over 55,000 colleagues in more than 100 countries help clients identify, plan for and respond to critical business issues and risk.

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such

Marsh Ltd is authorised and regulated by the Financial Services Authority for insurance mediation activities only.


OPINION Xxxxxxxx

From glasses to cooling towers, we can insure them.The venture capital and private equity industries cover a vast range of sectors. And so do we: from drinks to energy, and just about everything in between. Our entrepreneurial spirit and innovative approach enable us to find solutions where other insurers can’t – or won’t – making us the perfect Insurance Partner for investors and investee companies alike. To discover more about our business insurance, please talk to your insurance broker or visit www.QBEeurope.com

QBE European Operations is a trading name of QBE Insurance (Europe) Limited and QBE Underwriting Limited. QBE Insurance (Europe) Limited and QBE Underwriting Limited are authorised and regulated by the Financial Services Authority. QBE Management Services (UK) Limited and QBE Underwriting Services (UK) Limited are both Appointed Representatives of QBE Insurance (Europe) Limited and QBE Underwriting Limited.

SPECIALIST BUSINESS INSURANCEOFFICIAL INSURANCE PARTNER

301-BVCA INSURANCE GUIDE AD A4-V5.indd 1 21/06/2010 15:34


With the growth in 24 hour media and digital communications, the potential threat to an organisation of negative stories getting into the press has never been greater. Couple this with the fact that a crisis reported in a local newspaper is instantly available on the internet anywhere in the world and you will appreciate the speed at which stories can escalate and corporate reputation can be damaged.

Now, at this point you are probably thinking that this is all a bit melodramatic and in your line of business it is unlikely to happen to you. However, you would be wrong. Every day we read about companies that have failed to live up to their own marketing claims or have been affected by events outside their control. Whilst in many instances they are dealt with and disappear, should the press get involved they can soon develop into every company’s worst nightmare – trial by media. And when this happens, there is a serious threat to a company’s reputation if they fail to deal with events correctly.

As we have seen with BP, the media pays particularly close attention to larger companies facing crises, but smaller businesses are not immune. Take, for example, Ivell Marketing and Logistics, a product development and sourcing company based in Clacton, Essex. In 2009, the company decided to sack a 16-year-old employee after she made a posting on the social networkingwebsite Facebook saying that her jobwas‘boring’. The company followed all the necessary procedures and legislation when terminating the girl’s employment and one would imagine that, as far as the company was concerned, that was the end of the matter.

However, they could not have been more wrong. The girl’s local newspaper wrote about her sacking and things rapidly escalated with both national and international newspapers and broadcasters latching on to the story and sparking debates in the media about the ethics of employers ‘spying on staff’ using social networking sites. The company rigidly defended its decision to

sack the office administrator and faced the brickbats of public opinion. Whilst, from an employer’s perspective, the company mighthavebeenperfectlyjustifiedinitsdecision,thecompany’sname will now forever be tainted by what would have seemed at the time as a fairly straightforward decision. Even now, if you search for Ivell Marketing and Logistics on Google, six of the first ten search results feature articles on the ‘Office worker sacked for branding work boring on Facebook’: not the ideal first impression you would want to give to potential customers or potential employees.

Now this is of course an extreme example of how events can escalate but, with careful crisis communications planning and procedures in place, most incidents can be dealt with and resolved well before they risk causing irreversible damage to a company’s name. It is also worth noting that insurance policies exist that cover the cost of reacting to unforeseen events.

Most incidents that are likely to escalate into a crisis will be discovered internally and, as such, managing them can be fairly straightforward. However, in some cases they may be revealed directly to the media and the first a company will know that it has a crisis on its hands will be when the media gets in touch.

The speed of an informed response will determine the success of how the situation is handled. In this and all other examples, the key to avoiding a crisis is managing an incident quickly and efficiently with good internal and external communications so that it is ‘closed down’ as soon as possible: in effect, taking the wind out of the story’s sails before it can gain momentum. This isnotjustacaseofsaying ‘nocomment’andbatteningdownthe hatches; it is about developing a considered, structured approach, setting forward clear and concise reasons as to why something has happened and trying to set the media agenda.

Whilst it is impossible to prescribe a ‘one size fits all’ crisis communications plan as each company faces individual threats,

Managing Your Corporate Reputation and Avoiding Crises

Whether a start-up business or a FTSE100 company, all organisations are vulnerable to crises. Be it the result of a natural disaster, a product fault, a misbehaving employee or a whole raft of other unforeseen events, if not correctly handled there is the potential for relatively minor, seemingly innocuous events to escalate into a crisis which could damage a company’s reputation and bottom line.

OPInIOn


OPINION Managing Your Corporate Reputation and Avoiding Crises

the fundamentals for dealing with events that have the potential to develop into crises are the same, regardless of the company or its size.

The following is an effective way to handle a crisis:

1. A crisis communications plan is set up from day one and regularly updated so that, in the event of a potential crisis, everyone is aware of what needs to be done, nothing gets missed or forgotten and no time is wasted identifying relevant parties, looking for contact details, etc. Also, company spokespeople need to be identified and trained to deal with the media.

2. As soon as it becomes apparent that a crisis may be unfolding, as much information with regard to the nature of the event (who, what, when, where, how) is gathered by the crisis communications team. Once the facts have been established, they are evaluated to understand the implications for the client before any statement is made to the media. An initial holding statement and Questions and Answers are drafted, and these are amended on a continuing basis as the incident unfolds.

3. Depending on the event, a decision will be taken to handle the media reactively or proactively.

Reactive: If a call comes in to the client, it is dealt with by the crisis communications team. A conference call is then held by that team to determine the response to be delivered and co-ordination of communications to other audiences, for example staff, shareholders, customers and the local community is arranged by the team.

Proactive: An incident develops and the Crisis Communications team decides to pre-empt media enquiries. A statement is draftedinconjunctionwiththeclientandreleasedtothemedia,coordinated with communications to other audiences.

4. The media is constantly monitored to ensure that any stories that do appear are fair and accurate. In the event ofanarticlecontainingerrorsoromissions,thejournalistiscontacted immediately and a correction sought. At all times, communications channels are kept open with the media, indicating the Client is in control of the situation.

Threats to your and your company’s reputation are very real. It is important to realise that crises can and do happen and that nobody is immune. However, by understanding the threats that exist and by putting in place procedures and practices to ensure that matters are dealt with in a fast, controlled and considered manner should they arise, it is possible to minimise the impact that a potential crisis can have and avoid becoming a household name for the wrong reasons.

About the AuthorPaul Dulieu is a Director of Redleaf Communications and has spent the last seven years advsing companies of all sizes, both FTSE100 and unlisted businesses alike, on their Public and Investor Relations communications strategies. Prior to entering PR, Paul worked for 11 years as an accountant. He is a graduate of the University of Leicester School of Management.

[email protected]

About RedleafRedleaf Communications is a specialist media and investor relations agency that has seen exceptional growth since its launch in January 2000. Thanks to the teams’ vast experience in their respective fields, Redleaf is one of the most respected companies in the PR and IR industries, and one of their most sucessful.

Our clients represent a wide range of industry sectors and market capitalisations – large and small, quoted and unquoted. We advise national governments and majortrade associations.

Our team of experienced PR and IR executives advise more than 90 companies.

“Threats to your and your company’s reputation are very real. It is important to realise that crises can and do happen and that nobody is immune. ”


Duty of Utmost Good Faith The legal duty to disclose information lies at the heart of the relationship between an insured and its insurer. Any experienced buyer of insurance will know that when making a proposal for insurance, an insured is required to disclose any facts which would have had an effect on the decision of a prudent insurer either as to whether or not to enter into the contract, or on the terms of the insurance contract. Equally well known are the consequences of failure to comply with the duty - the insurer may avoid the insurance contract; i.e. it is treated as never having been entered into. There is a further requirement that the failure to disclose, or misrepresentation, must be an effective cause of the actual insurer entering into the insurance contract on the terms agreed.

In this day and age it is argued that the above formulation of the duty of disclosure tips the balance unfairly in favour of insurers. How, then, can the perceived imbalance of risk be rectified in appropriate cases? One way is by the inclusion in insurance policies of so called ‘innocent non-disclosure clauses’ which prevent the insurer from avoiding the policy where the insured’s failure to disclose, or misrepresentation, is ‘innocent’, or free from fraud or fraudulent intent.

How long does the insured’s duty of disclosure last? One might expect that while the insurance contract is in force the insured should continue to owe the insurer a duty to disclose any further material facts, or changes in the material facts originally disclosed to insurers. However, in the absence of any provision in the insurance policy, this is generally not the case. It is generally accepted that, if there is an ongoing duty, it is less extensive than that which applies at the pre-contractual stage, and includes, for example, the honest presentation of claims, and the requirement when amendments to the insurance contract are sought to disclose all matters relevant to that variation.

Given that the ongoing duty of disclosure is probably less extensive than the pre-contractual duty, insurers will sometimes seek to introduce an ongoing duty of disclosure identical to that which applies at the pre-contract stage, by including an express term in

the policy wording providing for such a duty. It may be difficult to persuade insurers to remove such terms if they are part of their standard wordings. However, if such a term is included the insured needs to be alive to the need to comply with it throughout the period of insurance though the courts may seek to interpret such terms restrictively.

‘Reasonable Care’ and ‘Increase in Risk’ Clauses An insurance contract will often contain further provisions requiring the insured to take reasonable care to avoid any liability or loss of the sort insured against under the insurance contract. The generic name given to such a term is a ‘reasonable care’ or ‘reasonable precautions’ clause. A buyer of insurance might feel that such a clause deprives him of the very protection he thought to be the purpose of the insurance, and so the courts have construed such clauses restrictively, limiting the circumstances in which insurers have been able to rely on them to defend claims brought by insureds.

An insurer may also attempt to seek protection in the policy wording against any factors which increase the risk against which it is providing insurance. Whether it is reasonable for the insurer to seek such protection, and the extent of the protection provided to it by a given contractual term, can be fruitful sources of litigation, the outcome of which will invariably depend on the construction of the relevant term in the context of the contract as a whole.

Claims notification ConditionsThe often considerable sum of money spent on the premium for a commercial insurance policy will be wasted if the policyholder is unable to make a substantial claim because he has failed to comply with the procedure specified in the policy wording for notifying that claim. Although this may seem an obvious point to make, it is surprising justhowoftenpolicyholderscanbeunawareof theprecise wording of the claims notification conditions contained in their policies, and, more particularly, whether those conditions include conditions precedent to the insurer’s liability for the claim. A condition precedent can be briefly summarised as an express term of an insurance contract, breach of which automatically discharges

Insurance Contract Hot Spots

When one considers the centrality of insurance to the risk management strategy and financial viability of any business, it is sometimes surprising how little time is spent by businesses on scrutinising the terms of their insurance contracts, which after all, are commercial agreements involving allocation of risk between the insurer and insured and penal consequences for breach as far as the insured is concerned. The purpose of this article is to briefly highlight some of the common contractual risk areas of which insureds should be aware.

OPInIOn


OPINION Insurance Contract Hot Spots

the insurer of liability for the claim to which the breach relates. On occasion breach can discharge the insurer from further liability under the policy as a whole: such conditions are far less common and would require very clear drafting to produce such an outcome.

The difficulty for policyholders who are understandably unaware of the finer points of insurance law is that it can sometimes be difficult to identify whether a claims notification condition is a condition precedent. In particular, the use of the label ‘condition precedent’ does not necessarily mean that breach of the clause will discharge the insurer of liability, if the clause is not sufficiently clearly drafted to give effect to such an outcome. Conversely, if the wording of the condition leaves no doubt that breach will entitle the insurer to refuse liability, there is no requirement that the label ‘condition precedent’ be used.

Any policyholder therefore needs to carefully read the claims notification conditions of all of their insurance policies to check that they are clearly worded and capable of being complied with, and, in the case of commercial insurances, to ensure that procedures are in place across the business to ensure notification of claims in compliance with the requirements of those conditions.

Warranties In insurance, a warranty is a term of a policy which an insurer will use to protect itself against the possibility that the risk it thought it was insuring is a better risk than the risk it actually is insuring. It is a statement, or ‘promise’ by the insured, that a state of affairs exists (or does not exist). The key point for policyholders is that breach of a term which can properly be construed as a warranty means that the insurer will be automatically discharged from liability with

effect from the date of breach, even though the breach has no connectionwiththelossthesubjectoftheclaimandmayindeedhave been remedied before the time of the loss.

Warranties can be classified as ‘present’ i.e. statements concerning the state of affairs at the time the warranty is given, or ‘future’ i.e. regarding the state of affairs throughout the duration of the policy period. Another way of subdividing warranties is in terms of warranties of fact and of opinion. The range of possible classifications, and the difficulty in establishing into which category a warranty falls, sometimes combined with quirks of drafting and uncertainty as to whether compliance has been achieved by policyholders, means that this is another area of insurance which has produced many disputes. Some comfort is provided to policyholders by the approach of the courts, which can be reluctant to find that warranties exist in the form contended for by insurers, or that the policyholder is in breach, or that the breach has the effect alleged by the insurer.

Like any commercial agreement, insurance contracts entail an allocation of risk between the contracting parties. The temptation for many corporate insureds, once an insurance policy is obtained, is to metaphorically if not literally put their insurance policy in a cupboard, in the expectation that they will only need to look at the policy at some indeterminate point in time after a loss occurs. We have tried in this brief article to show that the reverse is true: that corporates must thoroughly understand their obligations under their insurance policies when purchased, and,crucially put in place appropriate procedures throughout their businesses to ensure compliance with those obligations, to avoid the risk of losing the benefit of the insurance when it is most needed.

About the AuthorsPaul DavisonPaul Davison is a partner in Eversheds’ insurance group, and heads the firm’s commercial insurance practice. He acts for corporate and insurance market clients advising on a wide range of contentious and non-contentious insurance issues, including large scale coverage disputes, drafting insurance market agreements, and insurance regulation.

[email protected]

John McGrathJohn McGrath is a senior associate in Eversheds’ insurance group. He advises insurers, insurance intermediaries and corporate insureds on contentious and non-contentious insurance matters including policy drafting, insurance distribution agreements, coverage

disputes and regulatory advice. He worked for a major insurer for six years beforebecoming a solicitor.

[email protected]

About EvershedsEversheds is one of the world’s largest, full-service law firms, with over 2,000 legal advisers based in 47 offices around the world. Eversheds’ distinct client offering, is based around clientservice,aprojectmanagementapproachandaddedvalue. Eversheds has continued to grow, moving in 2009 into its new City headquarters in London and opening offices in Hong Kong, Singapore and Scotland. The firm’s international operationsextendto29jurisdictionsand 47 offices, giving Eversheds the ability to attract and service clients who operate in a global market place providing a level of consistency of serviceacrossmultiplejurisdictionsunrivalled by any other law firm.


OPINION Xxxxxxx

DUAL Corporate Risks is an underwriting agency committed to delivering insurancesolutions exclusively to businesses in the Mid-Market sector.

Headquartered in London, we trade at the centre of the world’s largest insurancemarketplace, partnering with clients and brokers to offer support and advice on such matters as legal and claims development and loss prevention.

We work hard to understand the needs of your business to ensure you consistentlyreceive an outstanding service from DUAL that is both tailored to your requirements and superior in its delivery.

It's ABOUt sUpeRIOR seRvICe

DUAL Corporate Risks London

London Office140 Leadenhall St

London EC3V 4QTUnited Kingdom

Tel: 020 7337 9888Fax: 020 7337 9889

DUAL Corporate Risks National Business UnitBarnett House

53 Fountain StreetManchester M2 2AN

United KingdomTel: 0161 233 7150Fax: 0161 233 7150

DUAL Ireland33 Fitzwilliam Square

Dublin 2Ireland

Tel: 01 669 4640

email: [email protected]

www.dualinternational.comwww.dualireland.ie

DUAL GTI A4 Ad_V2:Layout 1 23/06/2010 09:58 Page 1


OPINION Xxxxxxxx

BVCA Guide to InsuranceTECHnICAL

Sponsored by


What does it cover?Buildings Portfolio Insurance provides comprehensive cover for property portfolios including buildings, rent, employers and property owners’ liabilities including but not limited to:

• Material damage to commercial, retail, industrial and residential properties

• Loss of rental income

• Employers, Public and Property Owners Liability.

How do insurance wordings differ for this class?Lockton has developed its own ‘all risks’ based policy wording where warranties are replaced with reasonable recommendations to meet the unique requirements of all our clients. This exclusive wording has been designed to provide the widest possible cover and is underwritten by eight leading insurance companies. We realise that your clients may have specific risk management issues and we can design an insurance programme based around their requirements.

Some of the benefits include:

• The average condition can be deleted

• Omission to insure cover provided

• Failure of other insurances cover provided

• Appointmentofanominatedlossadjuster

• The insured company (and if the insured company so wishes,themanagingagent)canbeincludedasjointinsured under the property owners liability policy section

• Insurers will waive subrogation rights against the insured company (and if the insured company so wishes, the managing agent).

What limits are available/typically purchased?The limits applying are very much based on the reinstatement value of the properties concerned for material damage, appropriate rental income levels for specific periods, and liability limits where options will be provided.

PremiumsPremiums will reflect negotiation of the risk details including the claims experience and the levels of any agreed retentions.

Is there a significant premium variation for different geographies?

• Location of the property is a factor taken into consideration. Such factors as flooding losses experienced by insurers can affect the terms provided by them.

• Terrorism insurance has different zones which will affect the premium being charged.

• Obtaining cover for natural hazards will vary from country to country.

Opinion Legal Indemnity IssuesThere has recently been a marked increase in the amount of Legal Indemnity policy coverage being sought by property owners, especially when purchasing or selling assets. It now seems that where owners previously disregarded such cover as unnecessary, they are now being led by solicitors and/or financiers to cover any perceived risk that could impact upon ownership, and therefore value, in any way.

The term ‘Legal Indemnity’ covers many risks and below we set out some of those which our clients have experienced and for which we have arranged insurance protection.

Restrictive CovenantsThis is coverage against known restrictive covenants, which, by implication, prohibits the owner from using the premises in the manner for which they are currently being used or wish to be used. An example would be an old historic covenant imposed upon the premises not allowing the site to be used for any form of commercial activity such as a petrol station or for the sale of alcohol.

Even if there may be a long breach of the covenant, there is always an outstanding risk that somebody will attempt, at a later date, to enforce the covenant against the current owner.

Sometimes entire conveyances can go missing and they may contain unknown restrictive covenants. Insurance can be provided for covenants in these conveyances should it be found at a later date that the conveyance contained something which protected the use of the premises.

Lockton have placed policies which cover all known or unknown covenants before a certain date. This could be the completion

Buildings Portfolio InsuranceTECHnICAL


TECHNICAL Buildings Portfolio Insurance

date of a purchase of the property covered. By such a method everything is covered up to that date.

Access Way IndemnitiesAccess ways, whether vehicular or pedestrian, can present an owner with particular difficulties in that the access way into the property may not form part of their property. In many instances, ownership of an entrance or exit may be unknown.

It is advisable, however, to purchase cover for potential loss of asset value and to cover legal expenses to maintain right of an access for the property owner and/or clients/customers. The owner of the access way could appear at any time and use it as a ‘ransom strip’ in order to obtain financial benefit from the unfortunate property owner.

Defective TitleHere, the title to part of the site may not be vested properly with the current ‘owner’. Such a site could contain unregistered land and the ‘owner’ may have possession title but not title absolute. Again there is a risk that an individual or organisation could turn up at a later date with evidence of ownership.

The right insurance cover would defend the policyholder against such a claim and against a loss of asset value.

Chancel Repair LiabilityThis risk occurs when the property purchased or to be sold is subject toapotential liability to repair thechancelofaprereformation church. Although the most celebrated case, Wallbank v Parochial Church Council of Aston Cantlow, resulted in enormous legal costs, such an eventuality is unusual.

There is legislation that will lead to the eventual abolition of the charge in October 2010 - in many cases there is potential for a charge to be made in the intervening period.

Usage of Premises in Contravention of Class OrderSometimes premises are utilised in contravention of class order without express agreement of the local authority, although the authority continues to accept all local taxes.

“Sometimes entire conveyances can go missing and they may contain unknown restrictive covenants. Insurance can be provided for covenants in these conveyances should it be found at a later date that the conveyance contained something which protected the use of the premises.”


TECHNICAL Buildings Portfolio Insurance

An example we acted upon occurred where premises which had been designated for A1 use were being used for sui generis use. Although the local authority continued to accept payments, there was a potential for enforcement action to uphold the original classification. Such action would have resulted in a loss to the landlord and we were successful in placing coverage to protect their interests.

Drainage RightsThere are occasions when searches by a purchasing solicitor will result in advice that there is no permission for a landowner to drain his property over neighbouring land into public sewers. Such an eventuality would have a dramatic effect on the potential value of any site. If there is no right of drainage, despite drains being installed, the neighbouring owner could attempt to prevent drainage over their land. We have, on a number of occasions, placed coverage to protect the value of the property insured for our client base.

Reversion RightsHere, the risk to the property owner is usually from an earlier conveyance giving the right for a previous vendor to regain ownership should the use for which the site had been sold, change to another.

Lockton Global ExpertiseLockton currently arranges Global Insurance programmes covering in excess of €70 bn of clients’ assets throughout the world.

Our policy wording also extends to cover global programmes on an ‘All Risks’ basis. We consider our policy to offer real estate sector clients the widest cover available in the market today.

A number of the benefits and enhancements that can be provided are:

• Lockton will arrange for the issuance of local policies foreach of the countries where properties are purchased. We will then also place a master global Difference in Conditions/Difference in Limits (DIC/DIL) wording in the UK, sitting above the local policies. This is to ensure that the interest of the owner and its investors are fully protected

• Locktonwill provide Cover Summaries in English for eachlocal policy issued

• LocktonwillnegotiatewiththenominatedinsurersinLondon, who will underwrite terms for each risk

• Terrorisminsurancecanbearrangedeitherthroughthelocal markets and pools where applicable or alternatively though the Lockton’s Lloyds scheme

• LocktoninassociationwithourclientwillappointUKLossAdjusters,withlocalofficecontactsineachcountrywhereassets are held

• Clientscanreceiveagreedearningsthroughrebatedcommission.

Lockton’s Real Estate & Construction team would be happy to provide further information and advice.

About the AuthorSteve Bracey is the Managing Director in Lockton’s Real Estate & Construction Division.

Steve has worked in the insurance industry for more than 25 years, starting his career with C E Heath in 1984 within their Retail Team. He has specialised in property and construction insurances since 1985 and joined Lockton, formerlyAlexander Forbes, in 2001 where he helped set up and now heads the Real Estate & Construction team.

He has arranged comprehensive risk and insurance programmes for a wide range of clients in respect of their UK and Global property portfolio requirements. Steve now overseesthedivision’smajorclientsandstrategicdirectionand currently sits on Lockton’s Executive Committee.

[email protected]

About LocktonLockton is the largest independent, privately owned, global insurance broker delivering services throughout the world to businesses of all sizes, as well as to individual clients.

The Real Estate & Construction division is an experienced, highly skilled and dedicated group specialising in the provision of insurance products, services and risk management advice to the real estate and construction sectors. It has a strong and well-established presence in the insurance market and this experience and influence is employed effectively for the benefit of all its clients.


TECHNICAL Xxxxxxxx

REPRESEnTATIOn

Dedicated public affairs body

Dedicated media relations team

Regular interaction with investors in the UK and globally

Your company profile listed in the BVCA Member Directory

Regularly published industry research studies. Produced or commissioned by the BVCA Research team

nETWORKInG

Over 40 events per year including conferences, seminars, forums and dinners

More than 25 training courses per year with dinners and receptions

Meet investors, entrepreneurs, MPs, government officials and academics at our networking opportunities

Network with key playersinmajorinternational and emerging markets

KnOWLEDGE

Monthly industry newsletter from the BVCA CEO

Regular industry publications, including bvcaBRIEFING

Conferences and seminars providing thought leadership

Regular research analysis and reports including the Performance Measurement Survey and Report on Investment Activity

PROFESSIOnAL DEVELOPMEnT

Training courses for all levels, positions and disciplines

Access to regular research analysis and reports

CPD accreditation for ACCA, BSB, CIMA and SRA available on many BVCA courses and seminars

E-learning opportunities with the BVCA Training team

BVCA Membership

How could you benefit from BVCA membership?

More than 430 firms make up the BVCA membership and this number continues to grow as the services we provide become increasingly invaluable and essential.

The BVCA offers exceptional benefits and offers for every member

For further information please contact the BVCA:

T: +44 (0)20 7420 1800

E: [email protected]

www.bvca.co.uk

Reducing insurance costs for BVCA Members and their investee companies


What does it cover? Regardless of how the cover is structured, a fully comprehensive policy will cover continuing fixed costs and loss of profit of the business during the period that the business is interrupted following insured loss or damage.

What does it not cover? Business Interuption (BI) Insurance does not cover losses following damage to your property that is not insured; whether you have elected not to insure or an exclusion applies.

How do insurance wordings differ for this class? There are essentially three ways to arrange cover:

• Increased cost of working – only covers additional costsincurred to avoid a reduction in turnover; there is no loss of profit cover

• Grossprofit–theinsurancedefinitionisbasedonturnoverless specified expenses

• Revenue–althoughthewholerevenueisdeclaredtoinsurers,they will make deductions for savings made.

What are the typical exclusions? Policy wordings tend to follow the underlying property damage policy. Insurers will not provide BI cover where the insured’s interest in the property damage is not covered.

What limits are available/typically purchased? There is significant capacity for both UK and International risks with limits significantly in excess of GBP100m available. Limits are often combined with property damage values, most insurers can offer upwards of GBP50m.

Premium Case Study IndicationsAmajorUKandEuropeanfoodmanufacturersavedover30%ofits premium by restructuring its cover. Key aspects were:

• Recognisingthatthetruerisklayatthethreemanufacturingsites,not local warehouses holding stock for immediate delivery

• Reflecting the fact that approximately 80% of the labourforce was non-skilled and would not be retained in the event of a serious loss.

What is the typical length of a policy? Cover is usually arranged on an annual basis but indemnity periods can range from six months to five years.

Is there a significant premium variation for different geographies? Exposure to natural hazards such as storm, flood and earthquake can influence premiums but the underlying rates tend to follow property damage rates.

What should buyers look out for? Common problems are:

• Indemnity periods may not be sufficient to allow forreinstatement of property and to allow the business to recover

• Thespecifiedexpensesforgrossprofitmaynotaccuratelyreflect variable and fixed costs

• The impact of damage at key customers and suppliers –policies can be extended to cover this.

Who offers this type of insurance? Most UK commercial insurers offer BI insurance.

notable ClaimsFollowing the explosion of the petroleum farm at Buncefield a local hotel suffered percussion damage. Room lets were lost and

Business Interruption Insurance

Also known as Consequential Loss Insurance, Business Interruption Insurance covers a company’s loss of profits following loss or damage to physical property.

TECHnICAL

“BI cover is one of the more complex types of insurance to arrange correctly. It frequently does not provide the cover that the company thinks it is purchasing.”


TECHNICAL Business Interruption Insurance

functions, including weddings, were cancelled while repairs were carried out. In addition to the loss of revenue while the repairs were carried out, the hotel was also unable to take bookings until repairs were complete. Insurers covered the loss of gross profit until the pre-loss trading position was regained.

OpinionBI cover is one of the more complex types of insurance to arrange correctly. It frequently does not provide the cover that the company thinks it is purchasing.

The root of the problem is that the definition of gross profit used for an insurance policy is not the same as the one used in accounting.

Common problems include:

• Failuretotrulyidentifywhethercostsarefixedorvariable

• Failuretoreflecttheimpactoflong-termpurchasecontractson gross profit and the fact that can effectively become fixed costs

• Theimpactoflong-termsalescontractswheretheremaybeno reduction of turnover but considerable increased costs to the business to meet the contractual obligations

• Understandinghowlongitcantaketoreinstatepremisesandequipment and the impact of planning delays and equipment lead times on interruption periods

• Underestimating the time taken for abusiness to regain itspre-loss trading position once premises and equipment is reinstated

• Understanding the true dependence on key suppliers andwhether there are alternatives that really can provide seamless supply

• FailuretorecognisethataBIpolicyiscloselylinkedtopropertydamage insurance; if there is no cover for material damage the BI policy will not respond other than in certain, very specific situations such as customers and suppliers extension where the policy is very specifically extended.

An effective BI review is best taken without reference to the existing insurance programme. It will look at the key hazards the business faces and seek to quantify the impact on the business, the impact of the contingency plans and the true length of time required to replace and repair the property and for the business to recover.

About the AuthorNairn Lickrish began his career in insurance in 1985 with Alexander Stenhouse in Edinburgh.

FollowingamovetoLondonin1989,NairnjoinedFenchurchInsurance Brokers, now part of Heath Lambert, in 1996.

Nairn’s background is in major multinational property andcasualty programmes across a broad industry base from power and utilities, through manufacturing to professional service companies. He has also been involved in large deductible programmes with retentions managed by way of onshore and offshore funds and captives.

Nairn became a director of Heath Lambert’s Mergers, Acquisition & Disposals practice in 2006 and is heavily involved in the production of due diligence reports to private equity and corporate buyers. The main focus of the insurance due diligence process is to identify a target company’s insurable risks and assess how the insurance and risk management programme addresses these risks.

Heath Lambert’s M&A practice was established over 15 years ago and is one of the leading due diligence providers in the UK with operations delivered from the company head office in London and the Manchester office.

[email protected]

About Heath Lambert LtdAreas of specialisationCommercial and corporate insurances including property, business interruption, liability, motor, construction, directors’ & officers’ (D&O); professional indemnity (PI), Marine cargo, Credit, Surety, employee benefits and consultancy, risk and claims management services , private clients and fine art, affinity partnerships, personal lines as well as insurance due diligence and transactional insurance products.

DescriptionHeath Lambert is, a leading UK independent insurance adviser and broker, and employee benefits consultant with over 160 years experience. As leading insurance brokers, we are fast, flexible, open and responsive to all your insurance needs. We use all of our resources, people, experience, wit and courage to deliver outstanding results for all our clients, regardless of their size, their insurance requirements or where they are in the world.


What does it cover? Cover is primarily offered against the financial default of trade debtors. These debtors are created by open account or unsecured trading, typically for short-term sale of goods or services on terms up to 180 days.

What does it not cover? This insurance is limited to defined financial failure of the buyer, rather than disputes, so it is a case more of ‘can’t pay’ rather than ‘won’t pay’.

How do wordings differ? There are considerable differences in wordings between carriers in respect of defined risk although WTO underwriters have a broadly the same ground-up cover. XOL underwriters use similar definitions, but introduce greater levels of insured risk participation.

What are the typical exclusions? Most underwriters introduce risk participation by limiting indemnity (typically 85% - 90%) and various franchise deductibles. Underwriters will also exclude specific named buyers where they think appropriate, and this has caused significant problems recently with WTO underwriters facing significant criticism for withdrawing limits.

Available Limits Major buyer limits will be set by underwriters but, whilstguaranteed limits for the policy period are available in the XOL market, limited cover from other carriers has caused significant friction

Premium Indications WTO cover may typically be purchased at a rate of 0.2% on turnover, with XOL at less than half that, entirely dependant upon terms and conditions

Policy Length Usually annual renewal, but longer by negotiation.

Premium Variation for Different Territories Underwriters recognise the export element of most sales ledgers, and will include such buyers, but on a selectively priced basis. Underwriters with substantial international representation clearly hold an advantage here.

Buyer Beware The financial crisis has revealed significant problems for many insureds when their underwriter withdrew cover unilaterally on a significant number of buyers. Very few underwriters (apart from Chartis) offer guaranteed credit limits for the policy period, and the crisis has produced a marked increase in self-insurance schemes, including captive insurance vehicles.

Principal UnderwritersEuler, Atradius, Chartis, Coface.

OpinionThe perception of credit insurance as a valuable business tool has undoubtedly been tarnished by widespread dissatisfaction at WTO underwriters’ responses to the credit crisis. Many businesses relied upon the credit cover not only for advice and protection against credit losses, but also because the cover had been used to support their own trade finance programmes. Withdrawal of credit limits has led many to consider self-insurance as a viable alternative, and the industry is experiencing unprecedented demand for credit captive structures.

Past operational and structural difficulties for captive insurers assuming credit risk have now been largely overcome by the use of Global Limits Manager, which is a new tool for treasurers and FDs as well as credit risk managers. Chartis has promoted this from the outset with its joint venture with Aronova, thedeveloper of the system.

GLM can now be used as the first step to a professional captive structure. This self-retained risk can then be protected by a typical XOL cover, and Chartis has developed further products to help establish and capitalise these new vehicles.

Credit Insurance

This is a specialist class of insurance designed to protect corporate buyers against losses arising from default or non-payment of their buyers. The market is broadly divided into ground-up, whole-turnover underwriters (WTO) and excess-of-loss (xOL) covers. It is also possible in certain exceptional circumstances to purchase insurance against the failure of a single, named buyer.

TECHnICAL


TECHNICAL Credit Insurance

Once a client has moved down the captive route, the data and visibility of the underlying debtor asset which can be derived from GLM, can be the first step to a structured financing secured upon the trade receivables. Monetising the debtor asset in this way can be key to a company’s stability and growth.

The banking market has always taken a slightly cynical view as to the benefit of credit insurance because they have felt that the conditional nature of the insurance contract would allow underwriters too many opportunities to renege on claims. Chartis has now established Chartis Trade Finance which has deliberately modified industry-wide policy wordings into acceptable banking documentation to overcome these issues.

As a result of these developments, the credit insurance industry now has the opportunity to present a compelling and logical process in which the debtor asset can be effectively and economically utilised to improve cash flow. The process is also beneficial to banks where the underwriter’s own rating (Chartis A+, for example) can be interposed to become the counterparty risk in a transaction of this type. The impact of this in a post Basel II environment can be seen in a reduction of capital the bank would need to post against such a transaction. From the client’s point of view, this can lead to lower costs and higher advance rates against a given portfolio of debtors.

About the AuthorAlastair Malcolm has worked in the London insurance market for more than 30 years after qualifying as a Chartered Accountant [FCA] with PWC. He specialised in Credit Insurance and formed PanFinancial Insurance with capital from Continental of the US, Skandia and Yasuda to launch his design excess of loss credit cover. This has now been widely duplicated around the world.

He has pioneered the use of on-line credit limits from status agencies to improve dramatically the cost base of traditional credit insurance. This was developed in AMA Underwriting Agencies, later HMU, where he was Chief Executive from itsfoundation.HehasworkedinconjunctionwithSwissReto launch the first dedicated credit insurance Protected Cell Captive in the world and also provided consultancy to the United Nations UNCTAD programme for development of export credit cover for emerging nations.

He came to AIG 4 years ago and formed what is now Chartis Trade Finance to optimise the use of credit insurance in structured finance secured on trade receivables. He is also a strong advocate for captive solutions using Global Limits Manager for trade credit risk.

[email protected]

About Chartis Trade CreditSince Chartis (formerly AIG) started underwriting credit insurance more than 30 years ago, it has developed into oneof themajor playerson theworld stagewithofficesacross the globe. It has specialised in writing excess of loss contracts (XOL) which means that the client retains a level of self-insurance for the regular, attritional credit losses, but is covered against the larger, fortuitous credit defaults. Chartis provides non-cancellable limits on many policies and offers a range of products tailored to meet clients needs.

The team in the UK led by Neil Ross is highly experienced and continues to expand due to strong demand, particularly in support of Finance or captive programmes. It works alongside the Chartis Trade Finance and Political Risk team to provide full service for its many international clients. Chartis itself is one of the largest property/casualty insurers in the world, with an A+ S &P Rating.

“Once a client has moved down the captive route, the data and visibility of the underlying debtor asset which can be derived from GLM, can be the first step to a structured financing secured upon the trade receivables. Monetising the debtor asset in this way can be key to a company’s stability and growth.”


What does it cover?Direct financial loss which the institution has sustained at any time but discovers during the policy period resulting from:

Employee DishonestyDishonest or fraudulent acts of employees or those in collusion with them, provided that if the loss involves trading and loans activities, an improper personal financial gain for the employee or those in collusion with him/her must be both intended and realised. This applies with particular significance to unauthorised trading.

Physical (Financial) Property All physical risks to financial instruments (securities, negotiables, other) in transit or on premises.

The value of subscription rights from loss of securities or other instruments is included.

Damage to offices and contents caused by break in or safe burglary is included – excluding computer equipment and fire risks.

Documentary Fraud

1. Forgery or fraudulent alteration of:

• cheques and other negotiable instruments• written or printed transfer instructions.• Life office documentation (policy loan agreements, death

certificates and similar)• Mortgage documentation (limited to signatures obtained on

mortgages, real property deeds of trust or like instruments pertaining to heritable property or assignments of such through false pretences or deception – it would not extend to include ‘ringing’ or falsely inflated values in the mortgage application or applications by fictitious applicants).

2. Reliance on forged, fraudulently altered, counterfeit, lost or stolen Securities: “Securities” typically includes a wide definition, including all types of stock, shares and scrip, certificates, bonds etc, stock transfers, assignments, partnership guarantees and documents involved in dematerialised securities.

3. The institution having guaranteed or witnessed signatures on securities: where the signature is forged or there is a fraudulent alteration or the instrument is lost or stolen.

4. The institution having been deceived as to the identity of any person: for the purposes of buying or selling (financial) property.

Counterfeit currencyThe Institution’s receipt of any counterfeit currency purporting to be legal tender.

Legal FeesThe Crime policy covers loss of funds and (financial) property in the Institution’s custody as if it were first party loss to the Institution, regardless of ultimate ownership. If customers or clients of the Institution assert that they have sustained a loss, the bond covers legal defence costs if the loss claimed (if it is proved) would constitute a loss covered by the bond.

Electronic Communications and Computer FraudLoss through fraudulently corrupted or fraudulently input data or programmes – either on computers or inward electronic communications (including telephonic voice instructions) for funds transfers, costs of reconstituting and verifying data and programmes following such fraudulent acts or following malicious attacks (including virus and other malicious code).

The Institution’s liability for reliance of customers or financial institutions on data in its computer or electronic communications which fraudulently purport to have been sent by the Institution.

Extension can be obtained for:

• Liability for failure to carry out stop cheque instructions orfailure to honour valid cheques

• Theftoffundsinadvertentlytransferredtothewrongaccountor in the wrong amount by or on behalf of the Institution and where legally recovery fails

• TheftoffundstransferredbytheInstitutionunderthetermsof the Settlement Bank Agreement between Euroclear and the Institution

• Extortion demands – covering the amount of ransom paidfollowing threats to the Institution’s personnel, relations or invitees or threats to the Institution’s property or computer systems.

What does it not cover?• Documentary fraud other than in respect of the named

instruments and forgery, fraudulent alteration or counterfeit of such (as detailed above in ‘Documentary Fraud’). This would exclude cover for misrepresentation in loan applications etc or false pretences/identity theft involving paper documents unless forged signatures or fraudulent alteration were involved

• Identitytheft,whichmakesuseofPINorothersecuritycodes

Crime Insurance for Financial InstitutionsTECHnICAL


TECHNICAL Crime Insurance for Financial Institutions

to access computer systems is not, however, excluded if it involves the fraudulent input of data

• Dishonest or fraudulent acts of directors unless performingemployee activities

• Loss through loan defaults unless caused by EmployeeDishonesty or Documentary Fraud

• Factoring/Invoice Discounting/accounts receivable, forgeryor fraudulent alteration of bills of lading, trust receipts and similar

• Payments fromcustomeraccounts against itemsnotfinallycleared, including cheque kiting and ‘cross-firing’

• SafeDepositBoxes(policycanbeextendedtocover)• Wear,tear,gradualdeterioration,moth,vermin• Travellers’Cheques(otherthanEmployeeDishonestylosses)• Lossinvolvingplasticcards• Lossresultingpurelyfromtrading• Loss of trade secret or other confidential information (not

applicable to loss resulting from computer fraud making use of such information)

• Loss resulting from input by persons authorised to use acustomer’s authentication mechanism unless exceeding the authorised level for a fraudulent purpose

• Loss caused by any Employee’s further acts or omissionsafter the Institution has discovered that the Employee has committed a dishonest or fraudulent act

• Lossnotfirstdiscovered in thepolicyperiod (awarenessoflikely circumstances would constitute ‘first discovery’)

• (Financial)propertyinthepost–thepolicycanbeextendedto cover ‘cash letters’ (deliveries of non-negotiables/ cleared cheques etc) or sendings via registered or recorded delivery but a sub-limit of GBP25,000 might be applied to each sending.

How do wordings differ for this class?Policies do not differ a great deal in ‘headline’ terms but ‘nuances’ arise through poor drafting in insurers’ offered policies, whilst brokers seek to get absolute clarity on many points as well as to widen cover. The breadth of cover delivered by the text depends, as one would expect, on size of the institution and premium paid, but also, significantly, on the ability of the broker to perform a thorough review and upgrade exercise. The covers indicated above are typical of cover for a most organisations.

More ‘narrow’ policies might apply (by way of example only):

• The ‘intent’ for gain provisions in the Employee Dishonesty cover to all losses (not simply trading and loans)

• Restrictions as to premises – the Institution’s own or recognised places of safe deposit or, as to transits – by employee/ messenger/ armoured motor vehicle or security carrier

• ‘Tighter’ conditions as to ‘discovery of loss’ (usually it is possible to achieve restriction of the Institution’s discovery of loss to named departments – risk management or other – so that failure to notify loss of which the Institution is not aware outside of such departments will not trigger ‘late notice penalties’. Equally loss resulting from circumstances likely to giver rise to a loss of which the Institution was aware

prior to inception of the policy is excluded (see above – “first discovered”) but this exclusion can be amended to apply only to the awareness of such ‘responsible departments’

• A narrower definition of ‘Securities’ and absence of cover for life office documentation fraud or mortgage documentation fraud

• Absence of the extensions for: • Liability for failure to stop cheques or honour valid

cheques• Theft of funds inadvertently transferred to the wrong • Theft of funds transferred under the terms of the Settlement

Bank Agreement between Euroclear and the Institution• Extortion demands.

• A more rigorous approach to proposal disclosures (at the optimum, Insurers will not void the policy for innocent misrepresentation or failure to disclose matters in the proposal)

• Less favourable conditions as to automatic cover for acquired subsidiaries (a reasonable standard of cover for this would be 90 days automatic cover and notification to insurers only required where the asset size exceeds, say, 15% of the Institution’s gross assets.)

• A more restrictive approach to computer and electronic communications fraud cover by means of limiting cover to corruption of data on the Assured’s own systems and by adopting a ‘named systems’ approach to electronic communications – SWIFT, BACS etc.

• A retroactive date (when first accepting the risk an Insurer may exclude loss sustained prior to the inception of the policy – at best, there should be no restriction of when loss is sustained – whether before or during the policy period, provided it is “first discovered” (see above) during the policy period.

Typical Length of a Policy12 months

notable ClaimsDiversion of funds by Employees from infrequently used or dormant accounts, acceptance of inducements by customers to the Employee to arrange loans which breach the Institution’s internal guidelines and controls or other collusion with outside third parties, or the arrangement of entirely fictitious loans by Employees.

Hold ups, robbery, extortion by holding families of staff to ransom, forcing the staff member to use his knowledge of security codes to remove funds from safes etc.

Theft involving forged cheques, forged, counterfeit or lost or stolen securities.

‘Keylogging’, bogus transfer instructions making use of stolen security codes and other attempts to transfer funds out of accounts by computer hackers.

Theft of funds inadvertently transferred to the wrong recipient or transferred for the wrong amount (overpayment) to the correct recipient.


TECHNICAL Crime Insurance for Financial Institutions

OpinionThe Crime policy has been criticised in the past for the area of exposure which it leaves uncovered in terms of fraud, which does not involve the specified instruments and specified means of fraud (for example, forgery, fraudulent alteration, counterfeiting or presentation of lost or stolen securities are covered, but misrepresentation of facts in documentary form or wholly fictitious instruments are left uncovered). While it is true that there is a gap in this way, insurers have always felt that they cannot offer an open-ended insurance for fraud without it being demonstrable that checks and tests designed to prevent fraud have been overcome. In terms of documentary fraud, this involves the specified types of securities or negotiable instruments or in terms of the electronic communications cover, ‘testing’ of communications (in telephonic communications, for example) might be required as a pre-requisite for cover.

Fraud which is perpetrated by means of false pretences or identity theft remains uninsured so long as no actual forgery, fraudulent alteration or counterfeiting is used. While the policy covers theft of (financial) property by false pretences by persons on the insured’s premises, it does not do so elsewhere than the ‘physical loss’ (premises and transit) insuring clauses.

In contrast, the Employee Dishonesty cover is virtually all risks (any dishonestyorfraudulencebyanemployee,subjectonlytotheintentprovisions described earlier). The Computer and Electronic Crime cover too, could at least be described as ‘comprehensive’ covering as it does, loss resulting from any fraudulent input or modification of data or programmes. The limitations to electronic fraud are fewer than those in documentary fraud and tend to appear as limitations as to the systems (perhaps the assured’s computer only or named transfer systems in some of the more restrictive policies).

But, generally speaking, the computer and electronic fraud cover is undoubtedly wider than that provided for documentary fraud. This is due to a perception among insurers that there have been few successful computer crimes compared to the volume of documentary fraud. However, there are some signs that this attitude is changing and we may see more restrictions placed on the cover, which will seek to exclude ‘pure misrepresentation’ in a parallel fashion to the exclusion of this exposure in the documentary cover.

However, to take a current example, where identity theft or phishing is concerned, computer and electronic fraud cover responds and covers purely on the basis that the input of data eventually used by the thieves or ‘phishers’ is fraudulent – while the documentary fraud cover would only respond to such a loss (where perhaps false identity papers were used, for example) if there were also fraudulent alteration or forgery in specified documents (cheques, instructions, securities etc).

Unfortunately, there seems to be no early prospect of insurers wishing to extend the Crime policy in the current market conditions and purchasers of the policy need to be open to the fact that the Crime policy is not a complete solution. It is a vital element in an overall approach to risk management but experience shows that

a thorough review and reconstruction of policies is essential to ensure maximum cover is obtained.

The Crime policy therefore provides a significant role in transferring the crime risk but should be regarded as part of an overall risk management strategy, not, as we have said, the complete solution - one which needs to be used in a discriminating way to ‘dove-tail’ with risk mapping, profiling and other risk management tools within the organisation.

About the AuthorTrevor Simpson – Wording Specialist, Willis LimitedTrevor has 36 years experience in the insurance broking sector, spanning international claims, professional indemnity work for the Law Society, U.S. wordings and latterly 14 years in the Financial Institutions area as a wording specialist.

At Willis Limited Trevor is responsible for wording analysis and critiques as well as the drafting and presentation of policy wordings to underwriters. He is involved in the insurance placing process from the beginning of pre-placing or pre-renewal structuring of risks, offering advice and technical detail to assist in the coverages to be placed – through to the final signing of the policies. Trevor also devotes increasing time to the research of new products.

Trevor joinedWillis at the end of 2003 fromAonGroupLimited where he spent five years, before which he spent a number of years at Sedgwick Group.

[email protected]

About Willis Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk

management, financial and human resource consulting

and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately

17,000 employees serving clients in virtually every

part of the world. Additional information on Willis

may be found at www.willis.com.


TECHNICAL Xxxxxxxx

Our Research teamAs a core function of the BVCA, the Research team has worked closely for a number of years with leading research institutions around the world to produce a broad range of research publications. Subsequently the BVCA has successfully established its reputation as an authoritative source of research evidence for the private equity and venture capital industry in the UK.

Annually, the BVCA Research team publishes the Report on Investment Activity (RIA) and the Performance Measurement Survey (PMS). The RIA provides the most extensive country-specific investment figures each calendar year broken down by stage, sector and geography; the PMS analyses the aggregate net returns to investors from independent private equity funds by vintage year and investment stage, through which members firms can benchmark their own performance and add a degree of transparency for alpha seekers. With response rates typically at or near 100% for both surveys, the RIA and PMS help the BVCA to uphold the tradition and integrity of reliable and robust statistics that champion our industry to institutional investors and government.

In addition to its published output, the Research team constantly monitors developments that impact upon the industry and produces qualitative and quantitative research to add weight to the BVCA’s cause. In 2010, supplementary research has examined fund level performance, demonstrating that private equity firms generate alpha.

For further information:please contact the Research team on

+44 (0)20 7420 [email protected]

BVCA Directory 10-11 aw.indd 325 12/7/10 13:50:20


Despite the economic downturn D&O prices have remained relatively low. However, companies within the financial sector may have experienced uplift in their premium costs, due to the number of claims emerging from this area. The good news is that underwriters are keen to write D&O business for Private Equity (PE) firms and their investee companies, and increasing insurer capacity for this class of business is resulting in competitive pricing. Whilst price is important, what is often overlooked is the need to ensure that D&O policy wordings are tailored appropriately, so that policies pay out in the unfortunate event of a claim.

With more stringent regulation, combined with changes in legislation D&O policy wordings need to be reviewed regularly, to ensure that policies are in line with the firm’s position. A complication for PE investor companies is that their own directors often sit on the boards of the investee firms, which increases their exposure. Therefore it is of paramount importance that the D&O policies of the General Partner and their investee companies work in tandem and do not conflict with each other.

In addition to ensuring that D&O policies work in tandem, it is not recommended that the same insurer provides insurance for the Directors of a the PE firm and of its investee firms. The reason for doing this is that insurers can limit the aggregate amount of cover they are willing to provide in the event of a claim against a PE director sitting on an investee board. If a claim was to erode the investee company’s cover this could mean that the PE firms D&O policy would not respond and therefore leave a director without the further protection that they required and thought they had.

This also creates a potential balance sheet implication for both the investor and investee company, more importantly an individual could be left with no cover if the claim is unable to be indemnified by the company due to insolvency or legal jurisdictionreasons.

In our experience PE companies tend to be viewed as having ‘deep pockets’, so are likely to be the first port of call in a claim situation. This results in the firm having to lead the defence on behalf its directors, and sometimes those of its investee companies.

Another aspect to be considered is where an investee company is located and transact business - as with globalised business comes globalised liabilities. In the last few years a growing number of countries including Germany, Italy, Israel, the Netherlands, South Korea and Sweden, have enacted legislation which allows shareholders to file D&O claims for damages from investment losses. So in many instances D&O policies will need specific locally placed policies to ensure that the PE firms D&O coversrisksarisinginmultiplejurisdictions.

With directors assuming an increasing list of liabilities, it is more important than ever that D&O cover is purchased, but for Private Equity investor firms and their investee companies this form of insurance should not be purchased as a commoditised package – as highlighted above, this approach could prove a costly mistake.

To ensure that a D&O policy is fit for purpose, and to navigate the minefield of purchasing cover with appropriate wording, it is advisable to utilise the services of a proactive insurance broker, with experience of placing D&O for Private Equity investor firms and their investee companies. It is vital that your broker understands the structure of your organisation, and ensures that ALL material information is disclosed to insurers. This information should include the insurances purchased by the investor and investee companies, and information on the territories they operate in, so that a full review of the individual D&O policies can be done to understand how they interact with each other. This way tailored cover can be put in place, that will provide directors of both the investor and investee firms with peace of mind that in the unfortunate event of a claim being made against them their D&O policy will respond.

What can be covered?Firms purchase D&O cover for two main areas of potential exposure:

• themanagementoftheirownbusiness

• for their own directors, officers and employees who holdboard positions either at the Private Equity firm or the portfolio company.

Directors’ and Officers’ Liability Insurance

Directors’ and Officers’ Liability Insurance (D&O) is a core component of a corporate insurance programme. In response to the growing requirement for cover and changes in company legislation and corporate governance requirements, the D&O Insurance market has become highly specialised and new products have emerged to meet the needs of specific industries.

TECHnICAL


TECHNICAL Directors’ and Officers’ Liability Insurance

A D&O policy is a severable (“separate”) policy which means that it will cover each director and/or officer for their own individual interests. No statements or actions by one director or officer can be imputed to any other director or officer for determining their policy entitlements.

There is now huge focus on the duties and responsibilities of those individuals acting as a director/officer and this brings greater relevance and added pressure to those individuals as their personal assets are ultimately at risk in the event of a claim. In addition, the unique relationship between the Private Equity firm and the portfolio company brings its own unique risks as representatives become jointly liable for any actions taken as directors, andwhere the management style and decision processes may be less controllable than if they were within a single company.

Are D&O policy wordings standard?No, there are numerous policy wordings and the number of cases interpreting them has multiplied. D&O Insurance is complex so it is always recommended that a specialist insurance advisor with knowledge of a broad selection of insurers and recent regulatory changes reviews your policy wording regularly. As a general rule, clear policy language, tailored to the firm’s specific sector issued by a recognised insurer in that sector is strongly recommended. As an example, a financial institution will have a different D&O policy wording to a high street retailer due to the different services being offered.

What are the typical exclusions?The main exclusions which are common to most policies are:-

• Claimsbrought intheUS,byoronbehalfofthecompany,outside entity or insured person of the company or outside entity

• Claims arising from pollution, although the effect of thisexclusion has been reduced by allowing insured persons to defend a claim thereby benefiting from cover for legal costs incurred.

• Anydishonest,maliciousorfraudulentact

• Priorandpendingclaimsandcircumstances–anypendingorprior litigation will be excluded as of the continuity date of the policy, unless previously notified under the policy.

What limits are available and typically purchased?There is no set formula for calculating the levels of D&O Insurance thatindividualfirmspurchaseaseachfirmhasdifferentobjectives,investment strategies, levels of funds under management and geographical locations. Limits of up to GBP250m are available in the market, and only a few firms would look to purchase coverage in excess of this level.

PremiumsThese vary and are often dependent on the company’s financial security, risk management record and claims history. However, insurers are keen to write Private Equity business and there is

“With more stringent regulation, combined with changes in legislation D&O policy wordings need to be reviewed regularly, to ensure that policies are in line with the firm’s position. A complication for PE investor companies is that their own directors often sit on the boards of the investee firms, which increases their exposure.”


TECHNICAL Directors’ and Officers’ Liability Insurance

plenty of capacity for this business at present, which has resulted in premiums falling by approximately 20% over the last two years.

Claims activityDespite insurer’s gloomy predictions, the credit crisis and investee companies breaching covenants, the claims environment has remained fairly benign. However, D&O policies provide legal costs cover which can increase quickly unless monitored closely. It is worth noting that some insurers fight allegations themselves via in-house counsel, which can save money and ultimately premium.

How can I get comprehensive cover at a competitive price?Find an insurance broker with an understanding of the Private Equityindustryandexcellentcontactswithallthemajor,qualityD&O underwriters. They need to understand your business, and ensure that all material facts are given to insurers, as well as maintain an ongoing relationship with your insurer, to ensure appropriate coverage is obtained at a competitive price.

About the AuthorsRoger CurtisRoger works as a Partner within the Financial Risks team in London and is responsible for the business development of UK and European retail financial institutions. He has worked withinthefinancialsectorforover25yearsandhasenjoyedsuccess in a number of roles.

RogerjoinedLocktonin2008wherehehasenjoyedsuccessin advising a growing number of Private Equity firms on their insurancerequirements.PriortojoiningLockton,RogerworkedatMarshfor5yearswherehemanagedandadvisedmajorUKfinancial institutions including Lloyds Banking Group, Legal & General and Fleming Family & Partners in addition to a large number of PE firms.

[email protected]

Brett Warburton-SmithBrett has 20 years insurance experience. He is Partner at LocktonhavingjoinedfromAonandpreviouslyMarsh.Brettnow heads up and is responsible for client development at Lockton, focusing specifically on financial institutions and

professional service firms.

Starting his insurance career as a political risk underwriter with Euler Hermes in 1990, he moved to Amlin Credit, a Lloyds syndicate, where he was promoted to board director and then to Marsh where he led sales in the financial and professional

sectors. Experience in general insurance, captives and for the

last eight years within professional liability and Directors and Officers insurance

has enabled him to really understand the commercial and insurance challenges that clients face in their day to day lives. BrettjoinedLocktoninJanuary2008.

[email protected]

About Lockton Lockton is a specialist insurance broker with a rapidly growing book of Private Equity firm business. Its dedicated Private Equity team, led by Roger Curtis and Brett Warburton-Smith, spend time developing strong relationships with their clients, to identify the risks that their businesses face. They also develop clear targets and agree achievable objectivesand link delivery to remuneration. As part of this process they conduct a Risk Evaluation Process which enables them to gain a full understanding of the firm’s origins, history, structure and corporate strategy. They do this via conducting a series of interviews with the key stakeholders within the business, and the information gained is then disseminated to insurers. In this way, negotiations can be undertaken to ensure that the right coverage is purchased at the right price. The Lockton team would be happy to put you in touch with their Private Equity clients for a personal reference if required.


TECHNICAL Xxxxxxxx

Sometimes you need wisdom

Insurance Broking and Risk Management advice for Private Equity firms and

Investee Companies

For more information contact

Brett Warburton-Smith 0207 933 2242 07768 917550 [email protected]

Roger Curtis 020 7933 2344 07798 733487 [email protected]

Lockton Companies International Limited. A Lloyds Broker. Authorised and regulated by the Financial Services Authority.

BVCA_AD_00019.indd 1 9/6/10 15:04:34


What does it cover?Employers’ Liability (EL) Insurance will meet the cost of compensationforinjuriessustainedtoemployees(orillnesses),whether caused on or off the company’s premises. It should be noted that this type of insurance only covers the employees of the company.

What does it not cover?The policy coverage does not include people on sick leave or any action brought by an Industrial Tribunal.

How do insurance wordings differ for this class?As this class is a compulsory insurance and the parameters of that cover are defined by the Employers Liability (Compulsory Insurance) Act and subsequent amendments, wordings tend to be generic. However, some extensions are provided beyond that required generally, relative to overseas working and unsatisfied Court Judgments.

What are the typical exclusions?Exclusions are not allowed on an EL policy. However, restrictions to types of business undertaken may be noted in the ‘Business’ description of the employer. For example, ‘demolition not involving any use of asbestos’.

What limits are available/typically purchased?The minimum legal requirement is GBP5m per employer. However, the usual limit is GBP10m and, depending upon the size of the employer, limits can be bought of GBP100s of millions.

What is the typical length of a policy? 12 months. However, the policy indemnifies the Insured for all claims caused during that period for which claims can be made many years in the future.

Is there a significant premium variation for different geographies?No. However, there are areas of the UK with a more litigious nature and in these areas premiums may be set accordingly.

What should buyers look out for?One of the most important aspects is the insurer’s claims handling capabilities, as well as their having a proven track record in writing this type of business.

Who offers this type of insurance?In addition to QBE the main players in this market are Zurich, RSA, Chartis and Aviva.

notable ClaimsThe most notable claim was the Piper Alpha incident on July 6, 1988, where the North Sea oil production platform exploded resulting in a fire which killed 167 people.

OpinionHistory and development of Employers Liability Insurance. Although the first Employers Liability Act came into force as far back as the 1880s, it wasn’t until the EL Act of 1969 came into force that the insurance became compulsory.

It is almost unique to the UK with only Ireland having a similar product, although it’s not compulsory there. Most of Europe, the US, Canada and Australia, as well as many other territories, followaWorkersCompensation approachwhere the injuredemployee does not have to prove that their employer has been negligent and they are compensated on a specified basis.

“It is not only accidents that impact upon this class. The significant cost of asbestos related claims is well known and had cost insurers in excess of GBP20bn by 2004. This value continues to increase by the day.”

Employers’ Liability Insurance

The majority of employers are required by law to insure against injuring their employees whilst working in the UK. Employers’ Liability will meet the compensation and legal costs arising from any such injury.

TECHnICAL


TECHNICAL Employer’s Liability Insurance

Following the Piper Alpha disaster of 1988 an amendment to the Employers’ Liability Act allowed insurers to apply a limit of indemnity to policies, initially of GBP2m minimum and now GBP5m.

The most recent developments have seen the Access to Justice Review (known as the Woolf reforms) allow ‘no-win, no-fee’ solicitors to bring claims at no financial risk to the injured employee and as a consequence a large increase inthe number of claims, especially for the less serious injuries.Such is the extent of the costs incurred by these solicitors and, as a consequence, the premiums paid by employers that the legislature are currently looking to review this process whilst retainingtherighttocompensationfortheinjuredemployees.

It is not only accidents that impact upon this class. The significant cost of asbestos related claims is well known and had cost insurers in excess of GBP20bn by 2004. This value continues to increase by the day.

Client Support and Controlling Costs In addition to the cost of paying damages to an injuredemployee and the significant associated legal costs, there is also the direct cost of the employee being absent from the workplace. To ensure these costs are contained and minimised, it is important that employers’ implement robust health and safety policies and practices, provide occupational health resources where necessary and provide sufficient absence management policies. Your insurer should be able to assist in all of these areas.

About the AuthorDave Draper has worked in the insurance industry since 1986, working as an underwriter for Builder’s Accident Insurance Ltd., Charrington, Newline and Chubb where he was Senior Casualty Underwriter. In 2004 he joined QBE as UK/EuropePortfolio Manager and three years later was promoted to Joint

Head of the newly integrated UK and Ireland Division within Casualty.

He is now Head of Business Development. Dave is ACII qualified with Chartered Insurer status.

[email protected]

About QBEQBE Insurance Group Limited is one of the top 25 insurers and reinsurers worldwide with operations in all key global insurance markets. QBE is an Australian listed company with a Group Head office based in Sydney, and has operations in 47 countries with over 13,000 staff worldwide. Our underlying business strategy is to maintain operations in the key global insurance markets and, where possible, to be a lead underwriter for selected lines of business, setting rates and conditions in the markets in which we operate. QBE’s European Operations, which accounts for 35% of QBE Group turnover, is a leading specialist in London market and European commercial lines business. Active in both the Lloyd’s and company market, QBE offers considerable diversity to the broking community with literally hundreds of product lines we are confident we can provide you with a competitive solution.

QBE provides bespoke, client focused solutions through specialist underwriters, quality claims handlers and strategic risk management support. This has established QBE’s Casualty portfolio as a market leader.


To design and embed an effective environmental risk management programme within a business, it is important to strike the right balance between physical and financial risk management techniques. Environmental Impairment Liability (EIL) Insurance is playing an increasingly important role in this process. EIL Insurance is a form of insurance which can provide cover for the direct and indirect cost of cleaning up pollution as well as third party claims caused by historic and ongoing site operations. Most recently, the policy forms available within the EU have been developed to respond to the new liabilities created through implementation of the Environmental Liability Directive (ELD) by the various member states.

What does it cover?The EIL Insurance market offers a number of insurance products to suit different needs, but recent product development means that EIL policies now appeal to a wider range of businesses. The principal policy forms can provide cover for the following environmental risks, whether from gradual or so-called “sudden and accidental” pollution events:

• Statutoryown-siteandoff-siteclean-upcosts

• Thirdpartyown-siteandoff-siteclean-upcosts

• Third party bodily injury or property damage claims(including loss of use, diminution in value and third party business interruption)

• Third party nuisance claims (not necessarily involvingpropertydamageorbodilyinjury)

• Associatedlegaldefencecosts.

For businesses within the EU, some policy forms now include specific cover for the new liabilities and exposures introduced by the ELD, which applies to a wider scope of environmental damageandnotjustpollution.Thecoverprovidedcaninclude:

• Primary,compensatoryandcomplementaryremediation

• Lossmitigationcosts

• Preventativecostsincurredtopreventanimminentthreatof environmental damage.

The policies also contain an option to include cover for liabilities arising from historic pollution/legacy contamination at currently owned or occupied sites. Clean-up costs can be incurred even when the current owner or occupier is not the “original polluter” through the liability chain that often exists in contaminated land environmental legislation.

What does it not cover?EIL Insurance does not cover capital expenditure costs incurred to comply with the terms of environmental permits and licences (e.g. the need to install new equipment or change processes so that discharges to the environment are within acceptable limits).

Aswithanyclassof insurance,cover is subjectalways to theterms, conditions and exceptions of the policy.

How do insurance wordings differ for this class?Whilst most EIL policy wordings are intended to cover similar risks, there will, of course, be differences in the wordings that will have differing levels of importance for any given business. As such, it is important to understand what the different insurers and available wordings are able to provide, and to match this to the required cover.

What are the typical exclusions?Like most classes of insurance, EIL Insurance will contain exclusions. From a general risk aspect, policies will not cover, inter alia, fines and penalties that are not insurable by law or losses arising from the deliberate, wilful or intentional non-compliance with environmental law. From a technical risk perspective, policies will not cover liabilities arising from; inter alia, asbestos and lead materials in buildings, or underground storage tanks (unless sufficient information can be provided on

Environmental Impairment Liability

Environmental risk now presents a significant and increasing exposure to virtually all businesses. Escalating pressure to manage environmental risks effectively requires board level commitment, skilled assessment and comprehensive solutions. Increasingly stringent environmental legislation and reporting requirements, as well as a heightened public awareness of environmental issues, enhance the potential for regulatory action, third party claims and reputational damage. Furthermore, emerging areas of environmental risk serve to add further uncertainty as to the nature of future liabilities, which means proactive environmental risk management is the only option for many businesses.

TECHnICAL


TECHNICAL Environmental Impairment Liability

the latter). Again, it is important for a business to understand all the terms, conditions and exceptions that apply.

What limits are available/typically purchased?Most EIL risks placed into the market will typically have a limit of indemnity between GBP1m and GBP20m, which will tend to be underwritten by one insurer rather than on a scheduled or excess layer basis. However, for the larger, higher risk industries, higher limits are often considered. Notwithstanding this, the aggregated limits available from EIL insurers mean that lack of capacity is rarely considered as a significant factor.

As with many classes of insurance, the limits and deductibles levels required will be dependent on the risk tolerance and risk retention appetite of the business.

Premium case study indications?The EIL market is endeavouring to shrug off an image for providing only long-term policies designed for transactional risks. As such, the latest policy forms are designed to insure the operational environmental risks going forward with the overall aim to provide a broad scope of cover at affordable premiums, requiring minimal, readily available information, with flexibility on deductible level. For the small to medium enterprise (SME) market, annual premiums payable by policyholders can start at less than GBP1,000 (actual premiums will clearly depend on individual circumstances/needs and insurer underwriting).

What is the typical length of the policy?Policy periods of up to 10 years are available for EIL policies designed to cover solely historic contamination risks. However, the maximum policy period for policies designed to cover the operational risks going forward is three or five years, though having a one-year policy that forms part of a group’s annually-renewable insurance programme is of increasing interest.

Is there a significant premium variation for different geographies?The degree to which the EIL market is established can vary greatly between territories and this can lead to premium variations. However, many placements relate to risks located in countries with well-established environmental legislation regimes and formal environmental regulators, where increased competition can drive down premium rates.

What should buyers look out for?It is important for businesses to understand the extent of their environmental risks, how their insurance programme would potentially respond to a loss or liability that may arise, and how EIL Insurance could form part of a more comprehensive solution for the management of environmental risks.

For operations within the EU, certain activities in certain countries maybesubjecttocompulsoryfinancialsecurityrequirements.EIL Insurance could provide an effective and efficient solution to such requirements.

Who offers this type of insurance?It is not many years ago that the number of insurers actively underwriting EIL Insurance in the UK was relatively small. The market included ACE, Chartis (formerly AIG), Chubb and XL. However, this number has increased significantly in the last couple of years, including Liberty International, AXA and Allianz, and there are now at least 10 insurers offering cover for operational environmental risks, which means that there is now a wide choice of insurers.

notable ClaimsEIL insurersgenerallyagree that themajorityofclaimsactivityis currently being seen in respect of ongoing operations of businesses, rather than as a result of the existence or clean-up of historic contamination. This is particularly the case within continental Europe, where operational pollution insurance cover is more commonly taken up than is currently the case in the UK.

Not surprisingly, the nature of claims scenarios varies enormously, depending on the business activities of the insured. However, a common theme appears to be the involvement of human error in causing or at least contributing to pollution incidents, even where apparently robust environmental management procedures are in place.

Opinion Increasing awareness of potential environmental liabilities and the limitation or exclusion of environmental risk cover under other insurance classes continues to drive interest in the use of EIL Insurance.

The EIL market in the UK remains competitive for all client groups, but particularly for the small to medium enterprise (SME) sector. The second half of 2009 saw an increase in the number of operational risk policies placed, but a decrease in the number of multi-year transactional placements due to the continued relative low level of merger and acquisition activity.

“Increasing awareness of potential environmental liabilities and the limitation or exclusion of environmental risk cover under other insurance classes continues to drive interest in the use of EIL insurance.”


TECHNICAL Environmental Impairment Liability

There has been a significant increase in enquiries from multinational companies looking to understand the impact of the EU Environmental Liability Directive on their businesses including, in particular, the regions where compulsory financial security has, or will be, introduced.

Recent years have seen continued rate reductions, including to minimum premium levels, suggesting that further significant reductions are unlikely. However, healthy competition in the market and the increasingly pragmatic approach to underwriting and information requirements are set to continue to have a positive effect on the terms available.

EIL Insurance has traditionally been seen as a market which only offers long-term policies designed to assist with the management of potential historic pollution liabilities. As such, it has often been arranged as a transactional risk cover at times of M&A activity, when the potential for environmental liabilities to

exist comes into focus. However, as a result of the progressive change in the understanding of environmental risks and the need for a more comprehensive approach to environmental risk management, there has been demand from business for broader cover from EIL insurance.

The EIL Insurance market has responded to this demand through the enhancement or development of policy forms designed to align cover with the insured’s business activities rather than beingtiedtooperationsorprojectsatspecificsites.Theoverallaim is to provide a broad scope of cover at affordable premiums and minimal, readily available information requirements.

One of the key benefits of EIL insurance is the potential to include cover for liabilities arising out of the ELD, and also to remove the ambiguity and limitations of pollution cover typically provided under public liability policies.

About the AuthorNick Bennison has worked within the insurance industry since 1986. His experience includes 12 years as an underwriter for the Global and Corporate Risks unit of amajor compositeinsurance company. During this time, he held the position of senior liability underwriter.

Nick has worked within the specialist environmental insurance market since 2001. He combines his vast insurance industry experience and environmental science knowledge to provide advice on strategic environmental risk management and the design and placement of environmental insurance programmes for a broad range of industry sectors and projects.

Nick regularly contributes expert opinion to a range of publications. Recent comment has been provided for a Lloyd’s of London editorial on climate change and the insurance industry. The Met Office has consulted Nick for his views on information requirements for the impact of weather trends on environmental risks. Nick has also provided input to the British Insurance Brokers Association (BIBA) committee considering the impact of the EU Environmental Liability Directive.

[email protected]

About the Marsh Environmental Liability TeamAs the world’s leading risk adviser and insurance broker, Marsh helps its clients to identify, assess and manage risks arising fromchangingprocessesandinitiatingprojectstoestablisha more sustainable approach. It draws on the expertise and deep insights of colleagues across our global network to evaluate the threats and capture the opportunities presented. Experience comes from working with clients in managing their own environmental, supply chain, reputation and operational risks, and from the work carried out within the specialist areas of renewable energy, green technology, waste and recycling, water, resource extraction and green buildings.

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such

Marsh Ltd is authorised and regulated by the Financial Services Authority for insurance mediation activities only.


TECHNICAL Xxxxxxxx

In early 2010 the Research team launched an online data collection tool called ‘BVCA Benchmark’. Phase 1 of this exciting new development saw members given the ability to submit their investment and performance data through this application. This data is used to produce the BVCA’s two fl agship reports, the Report on Investment Activity (RIA) and the Performance Measurement Survey (PMS).

The eventual goal is for Benchmark to allow members to track and analyse investment trends, whilst benchmarking their fund performance

against the market on an aggregated basis.

Utilising the BVCA’s unique position as a trusted source of knowledge and information, our aim is to create the most

meaningful and comprehensive dataset available to add further value to our members

and provide deep industry insight.



analyse investment trends, whilst benchmarking their fund performance against the market on an aggregated basis.

Utilising the BVCA’s unique position as a trusted source of knowledge and information, our aim is to create the most

meaningful and comprehensive dataset available to add further value to our members

and provide deep industry insight.



What does it cover?Intellectual Property (IP) Rights Insurance is for the intangible element of your business.

Agreement Claims: Pursuit and defence costs (and Damages, if required for defence claims) for breaches of licence, confidentiality or other agreements exploiting IP. In the case of licence agreements, protection extends to include the IP indemnities given by the assured to its licensees. Thus, in the event of one of the assured’s licensees being cited as an infringer of a third party’s IP rights due to the sale of products incorporating the assured’s IP (under the licence agreement), the policy would indemnify the licensee as if a named assured under the policy.

Defence Claims: Defence costs (and damages if required) in the event of either an action being brought against the assured for actual or alleged infringement of a third party’s IP, or in the event of challenges to the validity of the Assured’s IP.

Pursuit Claims: Pursuit (enforcement) costs in the event of an action being brought by the assured against a third party for infringement of the assured’s IP.

While most industry sectors can be catered for, the ‘higher risk’ categories (for example, software/high tech or pharmaceutical), may require a survey. A request for a survey outside those industry sectors deemed “high risk” is very rare.

Cover extends to worldwide court actions, however, cannot include assureds domiciled in the U.S., unless an incidental subsidiary exposure.

What does it not cover/what are the typical exclusions?• Undeclared IP, products or agreements• Known prior circumstances• Dishonesty, fraud or malicious or criminal conduct• Deliberate or reckless acts giving rise to a third party claim• Fines or penalties.

How do insurance wordings differ for this class?Overall, there are only a few different insurance policies in existence, some of which have been created by insurers and the

balance by the small number of specialist brokers in the class.

There is little key differentiation between these products, with most based on the same format. However, nuances may occur, for example, regarding whether coverage extends to include the entirety of a product alleging to be infringing, or only that part of the product on which the policyholder owns the IP rights.

What limits are available/typically purchased?With exceptions for catastrophe protections, the highest sums insured tend to be in the region of GBP10,000,000 although GBP2,500,000 or GBP5,000,000 are the most common limits. On occasion, a limit of GBP1,000,000 is purchased however this is a recommended minimum, below which the premiums are not generally cost effective.

Premium case study indications?As a general guide, for worldwide excluding USA/Canadian court actions, premiums tend to start at:

LIMIT PREMIUM£1,000,000 £20,000

£2,500,000 £30,000

£5,000,000 £45,000

Loading factors will then include:

• U.S./Canadian court actions, the amount and type of IP and/or volume of sales in the U.S. If U.S./Canadian court actions included, the additional premium averages 20–25%

• Industry sector• Category of IP (Patent, trademark, copyright etc).

Equally, if cover is limited to a small portfolio of IP and excludes U.S./Canadian court actions (for example, a requirement under a specific client contract) then the premium will most likely be lower than the general starting premiums indicated above.

What is the typical length of a policy?12 months, though a maximum of 18 months is available.

Intellectual Property Rights InsuranceTECHnICAL

“Intellectual Property Rights Insurance is playing an increasing role in companies’ buying considerations as risk management moves away from the more traditional ‘plant & machinery’ type of approach to the protection of their crucial intangible assets. ”


TECHNICAL Intellectual Property Rights Insurance

Is there a significant premium variation for different geographies?Generally, all territories excluding USA/Canada (with the possible exception of the Far East) attract a similar premium rate. The USA/Canada will on average attract a 20-25% additional premium but this is dependent on the size of the IP portfolio and sales in these territories.

What should buyers look out for?As with all specialist classes of insurance, it is imperative to get the right advisor with a broad knowledge of IP from a legal perspective, together with good knowledge of available products and strong IP insurer relationships.

Secondly, there are a number of, for example, professional liability policies that make reference to covering IP infringement. In view of the critical importance of a company being able to enforce its IP, a stand-alone policy is imperative, underwritten by specialist IP insurers to whom an IP proposal has been made.

Who offers this type of insurance?The number of IP insurers is currently relatively small, mainly in view ofthelimitedexpertiseonthesubject.Ofthosethatdounderwritethis class, there is a mixture of Lloyd’s and non-Lloyd’s capacity, however, only a small number of these are lead IP insurers.

notable ClaimsThere is a steady amount of activity at all times which typically derives from ‘try-ons’ by third parties against insureds for alleged breach of IP, often as a bargaining tool for negotiation of IP rights/licensing. These frequently trigger the legal expenses (defence) section, and are the most common type of claim at the SME level.

At the brand name level, there have been many high profile IP cases reported in the national press which most recently have included L’Oréal v Bellure, Pavel Maslyukov v Diageo Distilling Ltd and Google Inc. v Louis Vuitton.

OpinionIP Insurance is playing an increasing role in companies’ buying considerations as risk management moves away from the more traditional ‘plant & machinery’ type of approach to the protection of their crucial intangible assets. As one Chief Risk Officer recently observed, ‘By some means, we can always find R&D and production resource elsewhere, but if we cannot enforce our IP, we have nothing.’

As IP Insurance activity increases, it is interesting to monitor the changing source of demand. Historically, the appetite was from university spin-off companies, which then naturally extended to include SME’s generally (more often than not listed). However, this has increasingly extended to being a requirement of investors, i.e. a requirement through agreement.

This has allowed insurers to begin to relax their underwriting criteria as this avenue removes the ‘selection against’ characteristic of any new class of business, i.e. proposers being weighted towards those who have or are expecting infringement issues.

A frustration of both IP insurers and the potential buyer has been that the availability of IP insurance is so unknown. This has been driven in part by a lack of investment by the insurance brokerages to invest in such a specialist area, and also by the need for change in mindset of the traditional risk manager to consider – and react to – the changing risk profile of their company. Although still the domain of specialists within the insurance arena, this class of insurance is now more often than not a consideration (unless a mandatory buy through an investor agreement) and, increasingly, a buy.

About the AuthorEdward WilliamsEdward Williams has 22 years experience of insurance broking into Lloyd’s and other carriers, and has specialised in protecting Intellectual Property (IP) since 1994. He was one of the creators of the current generation of IP protection solutions.

Initially focusing on defence and enforcement legal expenses programmes, he has also worked on programmes to indemnify larger businesses against loss of gross margins or research and development costs, following successful legal challenges against granted or registered IP rights. This extended to include protecting a business from the financial impact of reputational risk. He advises and creates solutions for businesses ranging from SMEs to global multinationals.

He was Chairman of the Insurance Advisors Group and the Insurance and Risk Analysis Advisor to the European Commission for their IP insurance feasibility study.

[email protected]

About Willis Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part of the world. Additional information on Willis may be found at www.willis.com.


What does it cover?Medical insurance is intended for the treatment of acute medical conditions. It does not pay for medications and prescriptions. Standard coverage does not include pregnancy or childbirth related costs.

How do wordings differ? Dependant on the type of underwriting chosen, or available, the wording will differ in regards to the treatment of pre-existing conditions. Underwriting options available are full medical underwriting, moratorium underwriting, ‘switch’ aka no further underwriting option and medical history disregarded underwriting.

What are the typical exclusions? Monitoring of ongoing conditions and management of chronic conditions and cosmetic surgery are not covered. Some pre-existing conditions may also be excluded from cover. Conditions/treatments related to HIV, drug or alcohol abuse are also excluded

Available Limits A variety of options are available to the purchaser including limited outpatient cover, implementing an excess, removing psychiatric cover and using hospital networks.

Premium Indications Currently medical inflation is around 8-10% as an annual increase. This, alongside age increases and claims history, can affect premium stability.

Policy Length Company policies are a 12-month annual contract.

Premium Variation for Different Territories The geographical location of the company will have an effect on the premiums as most are postcode rated. The average age of a scheme and historical claims data (if available) will also affect how premiums are priced.

What should buyers look out for?Buyers need to be aware of the type of underwriting they are being offered with regards to pre-existing conditions being covered. One must also ensure that they have sufficiently comprehensive cover for their needs and broad hospital usage in their area.

Who provides this type of Insurance?There are a number of providers offering this type of insurance, however, it is increasingly accessed through the broker market to ensure that correct advice is given and full market access provided.

notable ClaimsThemajorclaimandadvicetoseekisaroundcoverforcancerasthis can vary between providers.

OpinionThe true benefit to employers of having a healthcare policy in place is that it will ensure that staff are back at work quickly after theyfallillorbecomeinjured.However,withtheever-changinghealthcare market and products available to employers, the world of healthcare can be a confusing one.

Clients have historically gone direct to insurers and remained with that insurer for a number of years for fear of losing cover for pre-existing healthcare conditions. This can result in premiums becoming high as they haven’t been challenged and also that the level of cover may have become unsuitable. It is now a simple process to move providers without loss of cover.

With the breakthrough in medical advances, the cost of private healthcare does increase and as such, insurance plans need to be revisited on an annual basis to ensure that the cost of cover remains affordable and that the appropriate level of cover is offered. Employers need to be made aware of the detail offered in the polices provided. For example, each provider will offer

“Clients have historically gone direct to insurers and remained with that insurer for a number of years for fear of losing cover for pre-existing healthcare conditions.”

Medical Insurance

Private Medical Insurance provides the facility to receive treatments usually available on the nHS in the comfort of a private hospital at the convenience of the person insured.

TECHnICAL


TECHNICAL Medical Insurance

different cancer treatment, different hospital lists and a number of variations of cover.

There are also now alternatives in the market for those who have historically never sought cover due to high costs. A popular benefit is in the form of a cash plan that can offer simple cover for specialist consultations and physiotherapy at a fraction of the cost of a traditional policy and whereby pre-existing conditions can be covered.

It is important to speak with a specialist intermediary when dealing with the review of your employee benefits to gain the correct advice and be able to access the full market of providers.

About the AuthorWith over eight years experience in the insurance industry, Nicole Parkinson now works for Jelf Group Plc Employee Benefits as an employee benefits consultant specialising in healthcare. Prior to working for Jelf, Nicole worked for a large private healthcare insurance company responsible for the account management and sales of their private medical insurance product to SME and large corporate clients. This wealth of insurer knowledge allows Nicole to specialise in advising corporate clients on the most suitable private healthcare plan available for their employees’ needs, alongside the other employee benefits that they have in place.

[email protected]

About Jelf Group plcThe Jelf Group is an independent full-service consultancy working with businesses and individuals. We are a client focused

organisation specialising in providing insurance, healthcare, pensions financial services and commercial finance solutions.

Our aim is to help you provide the best employee benefits for your staff whilst minimising the disruption to your organisation and saving you money in the long term. Our approach is consultative as we like our clients to be fully involved. We’ll listen, examine and then advise; and when we’ve done that we’ll help you to implement and communicate your employee benefits package.

“The true benefit to employers of having a healthcare policy in place is that it will ensure that staff are back to work quickly after they fall ill or become injured.”


What does it cover?A contemporary Office Combined Insurance policy will provide an ‘All Risks’ cover for company’s assets, business interruption and legal liabilities, along with statutory such as employers liability, and public liability. Additional coverage is also available for terrorism, money, legal expenses and glass.

What does it not cover?Most policies will exclude professional indemnity, directors and officers coverage, motor vehicles, and credit risks. These are more appropriately insured under a specialist policy where the exposures can be more effectively underwritten.

How do insurance wordings differ for this class?Coverage and wordings have improved significantly in recent years. The best wordings are now shorter, provide more comprehensive cover and are much easier to understand.

What are the typical exclusions?This policy is designed to cover extraneous events beyond the insured’s control. Standard exclusions are pollution and

contamination, faulty or defective design, liquidated damages, and fines & penalties. Asbestos exposures are also excluded under all sections of the policy.

What limits are available/typically purchased?Assets will be insured for full value up to £5m. Higher property and business interruption limits are available if customers own buildings or have significant assets. Typical limits for public liability are £2m and the standard limit offered for employers liability is £10m.

Premium case study indications?Premiums vary significantly according to individual exposures and experience. Premiums range from £1,000 to £10,000 with average premiums closer to £2,000.

What is the typical length of a policy?Traditionally, a standard policy would be for 12 months, although some insurers are now offering continuous policies. Premiums on continuous policies can be collected by monthly direct debit, easing the burden on customers.

Is there a significant premium variation for different geographies?Yes. Rates vary according to theft and catastrophe exposure but there should not be significant variation between different Metropolitan areas. Theothermajor factor thatwill influencepremiums is specific underwriting considerations and a particular client’s claims experience.

What should buyers look out for?Customers should always look for a responsive insurer offering broad, comprehensive cover. Specifically they should expect coverage for extensions such as employee personal effects, property at exhibitions and for laptops whilst away from the office. Business interruption extensions, such as coverage following denial of access to your premises, plus interruption of utilities (telecoms, electricity, water, gas etc) are also important factors when selecting policies.

Insurers should be able to offer competitive terms for lower risk clients, particularly if they are part of a larger group or association. Finally, customers should expect an accessible, readable policy document, delivered swiftly after inception.

Office Combined InsuranceTECHnICAL


TECHNICAL Office Combined Insurance

Who offers this type of insurance?Many insurers including NU, RSA, Allianz, Chartis, Hiscox and DUAL. Corporate Risks all offer this insurance, either on a stand-alone basis or supplementing other product lines.

notable ClaimsThereareveryfewmajorclaimsofsignificanceinthissegment.Occasionally buyers may experience a larger Property loss or liability claim but these are unlikely to be remarkable or distinctive in terms of circumstances.

OpinionA properly constructed and competitively priced Office CombinedInsurancePackageproductshouldcoverthemajorityof your office exposures, allowing you to focus on your main business activities. Your broker or advisor will be able to guide you to the best product after analysing your exposures and any particular requirements.

Historically, this product has sometimes been an amalgamation ofseparatecoverswithinasinglepolicyjacket.Clearlythiswasfar from ideal and did not reflect positively on insurers or their capabilities. Thankfully, the underwriting and presentation of this product has improved significantly in recent years – extended proposal forms and incomprehensible policy wordings are now very much a thing of the past.

Most leading insurers will be able to assess and underwrite your business risks based on information provided by your broker in addition to a statement of facts from you as a customer. This ensures that you receive the cover and extensions you require, and that you are not paying for unnecessary enhancements that are not required.

Leadinginsurersofferastandardproductthatcoversthemajorityof your business risks and ensures that all your regular exposures are adequately insured. Extensions are readily available for additional exposures such as buildings (if you own your property or have a responsibility to insure), personal accident, computer breakdown and employee theft. All of these cover enhancements can be of value if your business operation has these additional exposures.

It can be useful to extend your coverage to include artwork, employee personal effects and wines & spirits. Whilst these may not be business critical exposures, if covered your insurer will be able to respond quickly if a problem develops.

About the AuthorSteven Price’s insurance career has been characterised by the establishment and development of a number of successful underwriting operations. This has spanned a number of leading international insurance operations including QBE, Chubb and Glacier Insurance.

Steven has over 25 years’ insurance experience and was most recently Managing Director of Glacier Insurance, establishing their successful insurance operation in London.

Prior to this he was Managing Director of QBE European Commercial operations and was instrumental in taking QBE from a mid-sized London market insurer to a larger, more profitable organisation with a UK Commercial network and operations in continental Europe. This was achieved through a combination of acquisition, recruitment and organic growth.

MostrecentlyhehasjoinedDUALCorporateRisksasDirectorof Property & Casualty to develop additional product lines and opportunities.

Working with the existing teams within DUAL Corporate Risksandcapacityprovidersinthemarkethisobjectiveistoidentify and build new segments that will complement DUAL’s very successful and established Professional Indemnity and Directors’ and Officers’ offerings.

[email protected]

About Dual Corporate RisksDUAL Corporate Risks is an underwriting agency committed to delivering insurance solutions exclusively to businesses in the Mid-Market sector.

Headquartered in London, we trade at the centre of the world’s largest insurance marketplace. Through an effective hub-and-spoke business model DUAL provides clients with local professional assistance backed by significant central resources. We also partner with clients and brokers to offer support and advice on such matters as legal and claims development and loss prevention.

We work hard to understand the needs of your business to ensure you consistently receive an outstanding service from DUAL that is both tailored to your requirements and superior in its delivery.

“Historically this product has sometimes been an amalgamation of separate covers within a single policy jacket. Clearly this was far from ideal and did not reflect positively on Insurers or their capabilities.”


What does it cover?Broadly speaking, Professional Indemnity Insurance (PI) indemnifies the insured from third party actions to recover damages, costs and expenses associated with this recovery or the defence of such actions.

A spectrum of organisations utilise PI, ranging from companies in the financial services arena through to technology providers and solicitors and accountants. If advice or a service is provided then it is likely PI will be applicable.

Policies are placed on a ‘claims made’ basis, this results in the insurer on cover at the point of notification of a claim being responsibleforthatloss,subjecttotheclientpurchasingsufficientretroactive cover.

How do insurance wordings differ for this class?There is huge variation of products in this specialist field, both by insurers and profession.

This is due to the fact that the wording has to work for the specific profession or area of work. There is no ‘one size fits all’ product for PI, it must meet the individual demands and needs of the client and the profession.

Most wordings will be on either a civil or legal liability basis with standard cover for:

• Breachofprofessionalduty• Libelandslander• BreachofIntellectualPropertyRights• Fraud/DishonestyofEmployees

What are the typical exclusions?This depends on the insurer but common exclusions are:

• BodilyInjuryandPropertyDamage• Prioracts• Establishedmisdeeds• Trustees• InsuredVersusInsuredclaims• Insolvency

What limits are available/typically purchased?Limits purchased vary depending on the risk appetite of the client and the profession, it would be normal for a company involved in the financial services sector to buy GBP10m cover but for the technology sector a company providing low level support might purchase just GBP1m. The limit required should be subject todiscussion and advice from a broker but it is ultimately protecting the balance sheet and as such the Board should endorse the level of protection.

The market can provide capacity in excess of GBP200m per risk.

It is commonplace to for policies to be written on a 12-month basis.

Professional Indemnity Insurance TECHnICAL

“The spotlight many financial institutions are under following the sub prime issues and economic downturn has heightened awareness of the important role insurance should play to mitigate the insurable exposures.”


TECHNICAL Professional Indemnity Insurance

Premium case study indications?Premium is very specific to each risk and profession, however premium factors include:

• Experienceofkeyemployees

• Worksplit,experienceineachsection

• Theuseoflimitationsofliabilityundercontract

• Investorprofile

• Investmentlocation

• Performance

The premium can also be impacted by the location of the client, fund, the investors and the manager.

Work undertaken in the US attracts the highest premium weighting and limits the number of insurers willing to offer cover.

What should buyers look out for?Buyers need to ensure both their broker and their insurer have demonstrable expertise with these products, both from a sales perspective but also through paid claims experience.

This is a product that should be integral within the risk management of the client, it is a backstop to protect the balance sheet but is not a replacement for strong internal controls. The placement of this policy should include a review of all internal controls and be integrated into the day to day management and reporting of incidents and complaints.

OpinionThis is a complex area of insurance, the number of insurance carriers and brokers experienced in understanding clients business and tailoring solutions to their insurance requirements is limited, this has become even more apparent in the difficult trading environment of the last two years. For example, the spotlight many financial institutions are under following the sub prime issues and economic downturn has heightened awareness of the important role insurance should play to mitigate the insurable exposures.

Other professions have come under considerable scrutiny as their advice has been reviewed in greater detail than would be expected post downturn. This has affected most companies linked to the property market, including solicitors, valuers and estate agents.

The insurance market has inevitably seen an increase in claims and litigation arising from clients increased awareness of their rights and an increasing willingness to question the conduct and service of their advisors. In addition, global financial regulators have significantly increased the number of routine investigations into the practices of some financial institutions which have then incurred substantial legal costs to comply.

Eighteen months ago rates increased significantly as insurers sought to repair their books of business, however recently these rates have begun to level out as insurers remedial action has stemmed the flow of losses. There was a lack of aggression in the market that has now returned and will inevitably lead to more competition as new entrants look to increase market share.

About the Author

Andrew Wallin was a founding Partner and is Managing Director of Oxygen Partners. Andrew began his career with RBS working in their Corporate and Institutional Finance team but quickly moved into the world of insurance where he eventually became Divisional Director at Willis FINEX. Andrew has experience in the design and placement of insurance programmes for a wide range of national and international institutions through the use of conventional and alternative insurance products and has alwaysspecialisedinfinancialrisks.AndrewjoinedOxygento develop the financial risks capability and has seen the company achieve the status as the fourth fastest growing private organisation in the UK in the Sunday Times Fast Track league.

[email protected]

An Insight: Edition One

About OxygenOxygen was formed in 2004 by a group of individuals who all believed passionately in improving customer service and in the need for modernisation of the processing infrastructure of the London insurance market. With financial backing from the founding directors and a group of senior international insurance figures, Oxygen was launched.

Today, we are a well established business. We have over 300 clients, ten offices across the UK and USA, and over 150 staff. In the Music and Entertainment industry we trade under the ‘Robertson Taylor’ brand.

Our business is staffed by high achievers who want a home focused on clients, with minimal bureaucracy. They apply their knowledge and experience to deliver insurance solutions that create business value for clients.

We are agile enough to take advantage of market changes for the benefit of clients, and to always ensure clients receive the highest quality advice and service.

We are a business full of energy, drive and passion.


What does it cover? A W&I policy insures the warranty and in certain cases indemnity, risks contractually created between a seller/warrantor and buyer within an SPA. Under a standard English Law SPA this should also include cover for the tax covenant/deed. If, following completion of an M&A transaction, there is a breach of warranty (or indemnity) the insured party will have the ability to claim directly against their W&I policy. If the seller/warrantor is the insured a (seller-side policy) W&I policy is designed to support them in the defence/pay on their behalf, as a result of a claim made by the buyer. Alternatively, if the buyer is the insured, (buyer-side policy), the buyer may claim directly against the policy for the loss they sustain, as covered in the W&I Insurance. For the above and other reasons, if the policy is going to work efficiently it is important to have a good understanding of the policy structure and terms required, as the correct policy structure will significantly enhanceaparty’sobjectives.

What does it not cover?The policy can not replace the disclosure, due diligence and contract negotiation process that is key to a good transaction. W&I Insurance relies on the sellers and buyers undertaking a thorough negotiation – as they would if insurance was not being provided. If underwriters consider that the disclosure or due diligence process has not been robustly carried out, or certain warranties have been agreed with language that is too broad in the context of the transaction, an underwriter may restrict or ultimately not offer cover.

As a general rule known risk is not insured as it is expected that the seller and buyer will have dealt with such issues on the transaction negotiation table.

How do insurance wordings differ?With a growing market of active insurers there are now a number of different wordings available. Generally the policies

are divided into common sections and certain of the insurers use similar base wordings.

Over the past five years the market has positively welcomed significant development and improvement (from an insured’s perspective) to their policy wordings, which has led to the terms and conditions being clearer and easier to understand.

While W&I is an insurance it is also a contract that is open to negotiation. Careful consideration should be paid to drafting the wording, particularly the exclusions and conditions, to ensure there is no mismatch with the transaction SPA.

What are the typical exclusions? Over the past five years the W&I policy has seen significant developments and improvements including a reduction in the standard exclusions. While the various insurer policy forms vary, common exclusions include:

• Forward looking warranties

• Breach of warranty actually known by the insured at inception of cover

• Fines and Penalties (uninsurable at law)

• Fraud or fraudulent misrepresentation by the insured

Subjecttotheparticularsofatransaction,additionalexclusionsmay be requested by the underwriters.

What limits are available/typically purchased?The limit of cover purchased by an insured is unique to their particular risk appetite and varies dependent upon the deal scenario. On a very general basis policy limits equivalent to 25% - 50% of the enterprise value of the transaction are arranged by financial investors.

A seller-side policy can insure the full limit of liability agreed in the SPA plus defence and investigation costs or a lesser amount where the insured is willing to bear the remainder of

Warranty & Indemnity Insurance

Warranty & Indemnity Insurance (W&I) (and other forms of transaction insurance) assists the parties to an M&A transaction in three key areas: (i) to realign potentially “deal breaking” issues; (ii) to secure an additional layer of financial security; and (iii) to transfer contractual risk encapsulated within a Sale Purchase Agreement (SPA) to a third party insurance company.

The W&I policy is an insurance contract that is arranged on behalf of an insured (either the buyer or seller/warrantor of the target) to meet the specific contractual requirements of the M&A transaction that the parties are negotiating.

TECHnICAL


TECHNICAL Warranty & Indemnity Insurance

the risk. It should be noted that the costs incurred in defending or investigating a claim covered under the policy will diminish the limit available for potential damages.

Under a buyer side policy the insured has the ability to select the limit of cover which provides them with the appropriate level of comfort that they want.

If required for a single project, insurance limits of betweenGBP200m to GBP250m can be sourced from the insurance market on a syndicated basis. Policy limits from a single insurer range between GBP15m to GBP35m.

Premium Case Study IndicationsDue to a number of converging factors but primarily increased competition, the UK W&I market is now more competitive than it has ever been. Premium rates for UK transactions can regularly be obtained in the region of 1% of the policy limit purchased i.e. a GBP10 million policy limit produces a premium for the entire policy period of GBP100,000 + applicable insurance premium taxes.

Minimum levels of premium, typically GBP12,500 to GBP25,000 will apply if the level of cover is GBP2,000,000 or less.

Factors that will influence the rate include the nature of the target business, the enterprise value compared to the policy limit and the policy retention (excess) that is required.

What is the typical length of the policy?The policy period is designed to mirror the periods agreed within the SPA, for example 12/18/24 months for non-tax warranties and seven years for tax (including deed/covenant).

Within the context of a buyer-side policy it is possible to extend the policy period beyond the limits agreed in the underlying SPA e.g. If sellers give a maximum of 12 months for the entire warranty suite, the W&I policy could give 24 months/seven years for non-tax/tax.

Is there a significant premium variation for different geographies?The market for UK business remains the most competitive but as insurers compete for new business the premium rates for the ‘attractive’ projects in traditionallymore ‘risky’markets - USA,Central and Eastern Europe and Asia/Pacific have been reducing.

What should buyers look out for?Like any product it is important to understand the market, remain up to date with the recent developments and close to changes that are being made. W&I is a very niche insurance product and few brokers have specialists that truly understand the market. It is worth searching out experts who can guide you through the underwriting process and ensure the cover provided is as competitive and full as possible.

Who offers this type of insurance?Within the London Market there are three specialist insurance broking teams and nine specialist insurance providers: Ace, Ambridge, AWAC, Beazley, Chartis, Chubb, HCC, Pembroke, Zurich.

notable ClaimsDue to the relatively young life of W&I Insurance as a product, particularly in certain territories, coupled with the confidential and sensitive nature of claims, obtaining details is difficult. It is known that a number of seven figure payments have been made and that the claims activity has increased over the past 18 months. Experience shows that most claims made under insurance policies have stemmed from third party claims or actions which neither party anticipated. The claims experience of the market shows that claims tend to occur either after the first audit or when there has been a significant change in management. Often, the first notification is made under the warranty relating to business since the accounts date or the management accounts warranties, but following investigation, more typically, will fall under the more specific areas of risk.

OpinionIf during a transaction you were told that almost the entire warranty and tax deed liability could be transferred to an established financial institution for a reasonable single payment, you would have to ask, ‘Why wouldn’t I do this.’

In the 2010 M&A environment where there is a greater need than ever to research, identify and assess risk and look for a strong counter-party to back that risk, the ability to transfer significant portions of contingent transaction liability, at a reasonable cost, needs to be given serious consideration. Transaction insurance can enable investors to unlock real value when exiting or acquiring a target business and due to an alignment of various factors, the transaction insurance marketplace is now more competitive and commercial in its outlook than it has ever been.

Key Applications• Transfer of ‘deal breakers’ away from the SPA and off the

negotiation table. Sizeable chunks of contingent risk that

“If during a transaction you were told that almost the entire warranty and tax deed liability could be transferred to an established financial institution for a reasonable single payment, you would have to ask, ‘Why wouldn’t I do this?’”


TECHNICAL Warranty & Indemnity Insurance

could otherwise leave parties at loggerheads, can be assessed by the insurance market and if their price is right for the transaction structure, transferred from the negotiation table into the books of that insurer.

• Transfer of ‘counter-party’ risk to an established financial institution with an Standard & Poor’s rating of A- or better.

• Allows the seller group and buyer group to achieve the levels of contractual liability that they require. For numerous reasons a seller group may be able to only offer minimal levels of liability when compared to the overall enterprise value. By building W&I Insurance into their exit process-sellers can offer a viable solution that gives a buyer a route to obtaining liability limits to the entire enterprise value, if required.

• Allows the seller group earlier access to a greater percentage of the consideration. Whether it is through structuring a buyer-side W&I policy into the deal, or by backing their own SPA liability, the sellers can take a greater portion of the consideration at an earlier time than they would otherwise be able to.

• Replaces the requirement to tie up consideration in escrow or to back SPA liability with a bank guarantee. Escrow and bank guarantees have sizeable costs associated with setting them up, maintaining them and they may tie up valuable cash for years. Each of these forms of security also retain the risk within their structure and will still entail a formal claims process if they are to be accessed. The rates at which W&I insurance is currently offered will produce a cost saving when compared to the more traditional options discussed above. Additionally, W&I allows risk to be transferred away from the seller and buyer and in the event of a loss, should not involve anything greater than the established claims process to access the funds.

With W&I Insurance pricing in the range of 1% of the insured limit and the cover being offered on a clearer and more professional basis, serious consideration should be given to incorporating the product into a transaction as a valuable and efficient alternative to more traditional counterparty security options.

“Whether it is through structuring a buyer-side W&I policy into the deal, or by backing their own SPA liability, the sellers can take a greater portion of the consideration at an earlier time than they would otherwise be able to.”

About the AuthorBrian Hendry is a senior member of the Willis M&A Practice and the Environmental Practice. He has specific responsibility for the Willis M&A Transaction Solution insurance team and is leader of the International Environmental Practice. He is a career insurance broker of over 25 years experience, the past 10 years of which have been focused on Transaction Solutions Insurance and Environmental Insurance placements. Prior to joiningWillis,BrianwaspartoftheTransactionLiabilityUnitat Aon.

Since specialising in M&A Transaction Solution and Environmentalinsurance,Brianhasbeeninvolvedinprojectsthat cover most sectors and most regions around the globe and has structured policies to address deal breaking issues ranging from complex tax structures to contingent litigation exposures to operational environmental cover to address emerging environmental law.

AcoreobjectiveistomakeW&Iandotherformsoftransactioninsurance, regular mainstream elements of the “financial product toolkit” for deal teams to draw upon as required. To this end, with other senior members of the team, Brian has worked to develop and expand the transaction solution market to ensure that the products are flexible, clearly address the requirements of a potential insured and that the process path required to arrange the insurance cover is increasingly straightforward.

[email protected]

About Willis Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part of the world. Additional information on Willis may be found at www.willis.com.


TECHNICAL Xxxxxxxx

Research ReportsThe Research team examine relevant areas which affect/are likely to affect the private equity and venture capital landscapes. In May 2010 a report on Venture Debt looks into the growth of this alternative asset class across Europe. Other areas being analysed include performance during the recession, CEOs prospectives of private equity and LPs commitments to the asset class.



BVCA Private Equity and Venture Capital Report on Investment Activity

Data collected and analysed by

Benchmarking UK Venture Capital to the US and Israel:What lessons can be learned?

Research study undertaken by Think, Play, Do Group

Report prepared for the British Private Equity and Venture Capital Association (BVCA)

Professor Bart Clarysse Imperial College Business School & University of Ghent

Dr. Mirjam Knockaert University of Ghent

Professor Mike Wright Nottingham University Business School

May 2009

A Guide to Private Equity

British Private Equity and Venture Capital Association (BVCA) / Preqin LP Survey

Global Investor Attitudes to Private Equity in the UK



TECHNICAL Xxxxxxx

Insurance - Employee benefits - Commercial finance - Wealth management

www.jelfgroup.com

Defined benefit schemes

Defined contributionschemes

Communicatingpensions

Pension transferbureau

Annuity service

Private medical insurance

Claims management

Health screening

Absence management

Occupational health advice

Employee assistance programmes

Dental cover

International cover

Income protection

Critical illness

Accidental death and injury

Group life assurance

Flexible benefits

Voluntary benefits

Total reward statements

Administration services

Reward andcommunicationconsultancy

Employee opinion surveys

Financial planning

Financial education

Retirement planning

Redundancy counselling

Benefit management

Healthcare

Employee protection benefits

Pensions

Financial planning and education

Our solutionsIndividually tailored to your business needs

Making the differencewith rewardand benefits To find out how we could make a difference to your business contactNicole Parkinson on 07595 651699 or [email protected]

J213/12/09


TECHNICAL Xxxxxxxx

BVCA Guide to InsuranceBROKER ACCESS MATRIx


The Matrix uses an in-depth information capture process specifically designed to determine the scope, depth of expertise and resource of the broker. The brokers who choose to partner with us on the Matrix pay an annual fixed subscription fee.

TheMatrixwascreatedtoofferanindependentandobjectiveprocess for determining a new broker appointment both for themselves and their investee companies. Potential enquiries may include:

• ‘We are dissatisfied with our current broker’s performance/responsiveness.’

• ‘Due to our expansion through investment, we now feel we have outgrown our existing broker.’

• ‘Our current broker cannot provide the coverage that we now require.’

• ‘We are opening offices in mainland Europe and want to keep our insurances with one broker.’

• ‘We don’t feel we our broker values our business.’

• ‘Our current broker does not have the expertise we now need.’

• ‘We feel our recent claim has been badly managed and have lacked support from our broker.’

• ‘We have been carved out from our parent company and want to find an alternative broker.’

• ‘We feel we are paying too much - our broker may not have sufficient market leverage.’

• ‘We would like to tender our insurance programme, which other brokers should we include?’

Step 1: Enquiry Information is Captured A prospective client (Member or investee company) will enter an enquiry through our simple data capture form at www.bvcainsurance.com. Enquiries come from both Members and investee companies and relate to insurance purchasing. Typically, enquiries are driven by a:

a) A change or tendering of broker/s

b) Access to a specialist service is required

c) Queries relating to the broker/client relationship

Step 2: Requirement Mapped Against Broker Partner Capabilities The data captured from the insurance buyer within the Member or investee company is mapped against the data held in the Matrix to produce broker potential broker partner matches. Factors used in the matching process relate to:

• Specialisation• Classesofbusiness

covered• Regionalofficelocations• Specificsectorfocuses• Servicesprovided

BVCA Insurance Services: Broker Access Matrix

BVCA Insurance Services has created the Broker Access Matrix (BAM), designed to be a fast and efficient mechanism for introducing Members and investee companies to insurance brokers that match their specific requirements for both traditional and specialist coverages.

BVCA

BAM enquiries are processed through six simple steps:


BVCA Broker Access Matrix

Step 3: Broker Matches Identified with Supporting Information & Reference Clients As part of the information capture process, partner brokers can submit up to five reference clients in each specific sector. This can be extremely helpful to Members and investee companies when they are seeking to establish the broker’s depth of specialisation in their sector.

The partner brokers are requested to monitor these reference clients to ensure their entries remain up to date.

Step 4: BVCA Insurance Services Discusses the Broker Matches with the Insurance Buyer As part of the BAM service, a member of BVCAIS will discuss the potential matches with the insurance buyer in order to remove any matches that prove unsuitable (for historic or other reasons). This also serves as an opportunity to discuss the insurance buyer’s needs in more depth.

Step 5: Information provided to Insurance Buyer and Broker Matches to Initiate Contact

Once the matches have been established, email (only) contact details will be provided on a mutual basis. Both parties are free to contact each other using this method to establish contact and to identify if there may be a basis to work together. The provision of contact details in the manner offers brokers the opportunity to demonstrate their responsiveness to the insurance buyer.

Step 6: Insurance Buyer Selects Broker or Brokers to Work With The insurance buyer, having determined through the BAM process that the selected broker/s have the capability to handle their insurances, can then proceed with their chosen broker appointment process.

We would request that BVCAIS Partner Insurers would be given an opportunity to provide terms if business is derived via this process. As stated above, the broking process should still take place in the usual way, which may mean the business is most suited for an insurer who is not a BVCA Partner Insurer.

“The Matrix was created to offer an independent and objective process for determining a new broker appointment both for themselves and their investee companies.”


TECHNICAL Xxxxxxx

BVCA Insurance ServicesReducing insurance costsfor Members andinvestee companies.

For more information contact:

Nathan Sewell [email protected] +44 (0)20 7420 1851

Jason Edwards [email protected] +44 (0)20 7420 1860

BVCA Insurance Services 1st Floor North, Brettenham House Lancaster Place, London WC2E 7EN

www.bvcainsurance.com



TECHNICAL Xxxxxxxx

BVCA Guide to InsuranceDIRECTORy


DIRECTORY

Aon Limited

Description: Insurance Broker/Advisor

Address: 8 Devonshire Square, London, EC2M 4PL, United Kingdom

Regional offices: Aberdeen; Birmingham; Bristol; Broxbourne; Chelmsford; Edinburgh; Farnborough; Harrow; Henley; Leicester; London; Leeds; Manchester; Newcastle; Reading; Redhill; Romford; Sheffield; Southampton; London

Web: www.aon.com

Telephone: +44 (0)20 7623 5500

Contact: Jon Higgins [email protected]

Contact: Pete Casciani [email protected]

Areas of specialisation: Insurance, Due Diligence, Pension, Risk Analysis, Transaction Services

nature of business: Aon Corporation is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its 37,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions.

Bridge Insurance Brokers Limited


Address: Cobac House, 14-16 Charlotte Street, Manchester, M1 4FL, United Kingdom

Web: www.bridgeinsurance.co.uk

Telephone: 0161 236 6969

Contact: Gavin Ruben, Director [email protected]

Contact: Peter Warburton, Director [email protected]

Areas of specialisation: Insurance Due Diligence; transactional products including Warranty & Indemnity; Initial Public Offering Indemnity, Prospectus; Directors’ & Officers’ liability. Full insurance broker services for portfolio companies; specialist teams in Property, Construction, Manufacturing, Leisure, Retail, Technology, Credit & Bonds, Environmental and Risk Management.

nature of business: Established in 1970, Bridge is a leading independent corporate insurance broker and risk adviser. We look to provide cost-effective services and contribute to the success and profitability of our Clients. We pay very close attention to detail and pride ourselves on our professional, yet friendly, approach. Our Clients value our integrity and trust us to take care of their insurance and risk requirements, as well as appreciating our imagination and the care we take. Spending time to better understand Clients’ insurance requirements, we design forward thinking programmes for conventional and complex risks. Our aim is to ensure that Clients secure the right policy from the right market at the right price.


DIRECTORY

Chartis Insurance UK Ltd

Description: Insurer

Address: 58 Fenchurch St, London, EC3M 4AB, United Kingdom

Regional offices: Glasgow, Belfast, Leeds, Manchester, Bristol, Birmingham, Croydon, Chelmsford, Newcastle upon Tyne, Reading

Web: www.chartisinsurance.com

Telephone: +44 (0) 20 7954 7000

Contact: Dawn Miller [email protected]

nature of business: Chartis Insurance UK Limited is one of the UK’s largest general insurance companies. With offices throughout the country, we provide innovative products and services to more than half the country’s top 1000 companies as well as many public and private sector organisations and millions of individuals. We are part of Chartis Inc., a world leading property-casualty and general insurance organisation with a 90-year history, serving more than 40 million clients in over 160 countries and jurisdictions.Chartisoffersanextensiverangeofproductsand services, deep claims expertise and excellent financial strength. Chartis Insurance UK Limited is authorised and regulated by the Financial Services Authority (FSA number 202628).Registered in England: company number 1486260. Registered address: The Chartis Building, 58 Fenchurch Street, London, EC3M 4AB.

Dual Corporate Risks

Description: Underwiting Agency

Address: 140 Leadenhall St, London, EC3V 4QT, United Kingdom

Regional offices: London, Manchester, Dublin

Web: www.dualcorporaterisks.com

Telephone: +44 (0)20 7337 9888

Contact: Oliver Leonard [email protected]

Contact: Jeremy Isaacs [email protected]

nature of business: DUAL Corporate Risks is an underwriting agency committed to delivering insurance solutions exclusively to businesses in the Mid-Market sector. Headquartered in London, we trade at the centre of the world’s largest insurance marketplace. Through an effective hub-and-spoke business model DUAL provides clients with local professional assistance backed by significant central resources. We also partner with clients and brokers to offer support and advice on such matters as legal and claims development and loss prevention. We work hard to understand the needs of your business to ensure you consistently receive an outstanding service from DUAL that is both tailored to your requirements and superior in its delivery.


DIRECTORY

Heath Lambert Limited


Address: 133 Houndsditch, London, EC3A 7AH, United Kingdom

Regional offices: London, Aberdeen, Birmingham, Brierly Hill. Chelmsford, Edinburgh, Horsham, Leeds

Web: www.heathlambert.com

Telephone: +44 (0)20 7560 3000

Contact: Alan Pratten [email protected]

Contact: George Minoprio [email protected]

Contact: Nairn Lickrish [email protected]

Areas of specialisation: Commercial and corporate insurances including property, business interruption, liability, motor, construction, directors’ & officers’ (D&O); professional indemnity (PI) . marine cargo, credit, surety. employee benefits and consultancy, risk and claims management services. Private clients and fine art, affinity solutions. insurance due diligence, transactional insurance products.

nature of business: Heath Lambert is a leading UK independent insurance adviser and broker, and employee benefits consultant with over 160 years experience. As leading insurance brokers, we are fast, flexible, open and responsive to all your insurance needs. We use all of our resources, people, experience, wit and courage to deliver outstanding results for all our clients, regardless of their size, their insurance requirements or where they are in the world.

Howden Insurance Brokers Ltd


Address: Bevis Marks House, 24 Bevis Marks, London, EC3A 7JB, United Kingdom

Web: www.howdengroup.com

Telephone: +44 (0) 20 7648 7211

Contact: Edward Rahtz [email protected]

Contact: Danyalle Brinsmead [email protected]

Areas of specialisation: We provide cover for Directors’ and Officers’ (D&O), Professional Negligence, Regulatory Investigation Costs, Crime Insurance and Employment Practices Claims. Operational insurances for specifically commercial needs include Contents, Employers’ and Public Liabilities, Business Interruption and Travel. Keyman insurance and Investor Company Insurance Programmes ensure that appropriate Management Liability cover is available at portfolio level to protect your balance sheet.

nature of business: As specialists in the field of Private Equity and Venture Capital we understand the legal, geographic and structural complexities prevalent in the industry and appreciate the importance of strong relationships with portfolio companies and investors. Whether you’re a well-established firm or at the start-up stage, our goal is to make sure you maintain the personal and corporate confidence you need to succeed in today’s volatile economic environment.


DIRECTORY

Jelf Group plc


Address: Clarendon House, 59-75 Queens Road, Reading, RG1 4BN, United Kingdom

Regional offices: Altrincham, Bath, Bristol, Cardiff, Cheltenham, Guildford, Ludlow, Newton Abbot, Okehampton, Oxford, Paignton, Plymouth, Reading, Ringwood, Swansea, Swindon, Taunton

Web: www.jelfgroup.com

Telephone: +44 (0)118 983 9990

Contact: Nicole Parkinson [email protected]

Contact: David Hix [email protected]

Contact: Theo Pastuch [email protected]

Areas of specialisation: Our aim is to help you provide the best employee benefits for your staff whilst minimising the disruption to your organisation and saving you money in the long term. Our approach is consultative as we like our clients to be fully involved. We’ll listen, examine and then advise; and when we’ve done that we’ll help you to implement and communicate your employee benefits package.

nature of business: The Jelf Group is an independent full-service consultancy working with businesses and individuals. We are a client focused organisation specialising in providing insurance, healthcare, pensions, financial services and commercial finance solutions. Jelf Employee Benefits areas of specialism are Pensions, Healthcare, Financial planning and education, Benefit management and Employee protection benefits. The Jelf Groups range of services can be tailored to most businesses but we also operate a large number of bespoke schemes and products covering a wide spectrum of industries.

Lockton International Ltd


Address: The St Botolph Building, 138 Houndsditch, London, EC3A 7AG, United Kingdom

Regional offices: Belfast, Birmingham, Bristol, Edinburgh, Leeds, Manchester, Newcastle

Web: www.lockton.com

Telephone: +44 (0) 20 7933 2344

Contact: Roger Curtis [email protected]

Contact: Brett Warburton-Smith [email protected]

Areas of specialisation: Services for Private Equity firms include: Professional Indemnity and Directors’ & Officers’ insurance; Crime, Employment Practices and Pension Trustee Liability Insurance; Warranty and Indemnity; Insurance Due Diligence; Deal facilitation wraps; Crime Insurance; Global Regulatory Compliance; Data Privacy and Reputational Risk; Risk Diagnostic Evaluation; Tax Liability Insurance.

nature of business: As the lead sponsor of BVCA Guide to Insurance, Lockton has partnered with the Association to support its members in the challenging risk, insurance and compliance environment. Working closely with the BVCA our aim is help members become more successful through the efficient identification, management and arranging of market leading innovative insurance solutions. Founded in 1966 Lockton is the world’s largest privately owned insurance broker with offices in 49 countries and revenues in excess of $800m. We provide risk and insurance services to all types of companies across all jurisdictionsandterritories.OurInternationalbusinessisHeadquartered in City of London (14 offices in the UK). At Lockton we deliver an unrivaled level of service, our private ownership and Partner led business model allows us to put our clients at the centre of everything we do.


DIRECTORY

Marsh Limited


Address: Tower Place, London, EC3R 5BU, United Kingdom

Regional offices: Aberdeen, Belfast, Birmingham, Bristol, Cardiff, Carlisle, Edinburgh, Glasgow, Guernsey, Isle of Man, Leicester, Letchworth, Liverpool, Londonderry, Maidstone, Manchester, Milton Keynes, Newcastle, Norwich, Reading, Redhill, Southampton, Witham

Web: www.marsh.co.uk

Telephone: +44 (0) 20 7357 1000

Contact: Edwin Charnaud [email protected]

Contact: Daniel Max [email protected]

nature of business: Marsh is the world leader in delivering risk and insurance services and solutions to clients. It provides insurance broking, risk management, risk consulting, alternative risk financing and insurance programme management services for businesses, public entities, associations, professional services organisations, and private clients globally. Marsh is organised by client, industry, and risk categories to facilitate the global delivery of highly specialised products and services covering a wide spectrum of risks. Marsh is strengthened further by being part of MMC, the premier global professional services firm providing advice and solutions in risk, strategy and human capital. Through MMC’s market leading brands, over 55,000 colleagues in more than 100 countries help clients identify, plan for and respond to critical business issues and risk.

Oxygen Insurance Brokers Ltd


Address: 41 Lothbury, London, EC2R 7HG, United Kingdom

Regional offices: Bristol, Glasgow, Leeds & Manchester

Web: www.oxygeninsurance.com

Telephone: +44 (0)20 3178 8201

Contact: Calvin Barnes [email protected]

Contact: Andrew Wallin [email protected]

Areas of specialisation: Financial Services, Professions, Music and Entertainment, Construction, Power and Mining, Corporate Risks, Reinsurance, Superyachts, Private Client.

nature of business: Oxygen was formed in 2004 by a group of individuals who all believed passionately in improving customer service and in the need for modernisation of the processing infrastructure of the London insurance market. With financial backing from the founding directors and a group of senior international insurance figures, Oxygen was launched. Today, we are a well established business. We have over 300 clients, ten offices across the UK and USA, and over 150 staff. Our business is staffed by high achievers who want a home focused on clients, with minimal bureaucracy. They apply their knowledge and experience to deliver insurance solutions that create business value for clients. We are agile and nimble enough to take advantage of market changes for the benefit of clients, and to always ensure clients receive the highest quality advice and service. We are a business full of energy, drive and passion.

An Insight: Edition One


DIRECTORY

QBE Insurance Group

Description: Insurer

Address: Plantation Place, 30 Fenchurch Street London, EC3M 3BD, United Kingdom

Regional offices: Birmingham, Bristol, Chelmsford, Glasgow, Leeds, Manchester, Stafford

Web: www.qbe-uk.com

Telephone: +44 (0) 20 7105 4000

Contact: Dave Draper [email protected]

nature of business: QBE Insurance Group Limited is one of the top 25 insurers and reinsurers worldwide with operations in all key global insurance markets. QBE is an Australian listed company with a Group Head office based in Sydney, and has operations in 47 countries with over 13,000 staff worldwide. Our underlying business strategy is to maintain operations in the key global insurance markets and, where possible, to be a lead underwriter for selected lines of business, setting rates and conditions in the markets in which we operate. QBE’s European Operations, which accounts for 35% of QBE Group turnover, is a leading specialist in London market and European commercial lines business. Active in both the Lloyd’s and company market, QBE offers considerable diversity to the broking community with literally hundreds of product lines we are confident we can provide you with a competitive solution.

Willis Limited


Address: The Willis Building, 51 Lime Street, London, EC3M 7DQ, United Kingdom

Regional offices: Belfast, Birmingham, Bolton, Bristol, Cardiff, Dundee, Edinburgh, Glasgow, Guernsey, Hertford, Ipswich, Leeds, Leicester, Maidstone, Manchester, Norwich, Preston & Reading

Web: www.willis.com

Telephone: +44 (0) 203 124 6000

Contact: Alistair Lester [email protected]

Areas of specialisation: Global insurance broker encompassing due diligence services, risk consultants & transaction insurance placements.

nature of business: Willis Group Holdings plc is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part of the world.

bvca guide to insurance 2010/11

Documents

crime insurance

credit insurance

medical insurance

insurance sector

insurance purchasers

employers liability

management liability

warranty indemnity insurance