Proprietary and Confidential

Liberty Mutual Insurance

Europe Limited (LMIE)
Dennis Gattinger
Assistant Vice President
27th of June 2013

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 Proprietary and Confidential

Who is LMIE?
• Wholly owned subsidiary of Liberty Mutual Insurance Group
• Trades as Liberty International Underwriters (LIU) for
Specialty Lines and Liberty Mutual Insurance (LMI) for
Commercial Lines
• Operating in the London Market for over 30 years
• Provides range of commercial insurance products via
network of independent brokers
• Offices in Birmingham, Bristol, Cheltenham, Cologne, Dubai,
Dublin, The Hague, Hamburg, Hong Kong, Kuala Lumpur,
Leeds, London, Madrid, Manchester, Paris, Singapore,
Zurich
• $3.2 billion in consolidated assets in 2011
• Regulated and authorised by the FSA
• ‘A’ (Excellent) rating by A.M. Best
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Liberty Mutual Insurance Group

• Founded in 1912 in Boston, US
• Celebrating 100 years in business in 2012
• 3rd largest US property and casualty insurer
• 84th on Fortune 100 list of largest US corporations (base:
2011 revenue)
• 50,000 employees in > 900 offices worldwide
• $117.1 billion in consolidated assets in 2011
• ‘A’ (Excellent) rating by A.M. Best Co.
• ‘A2’ (Good) rating by Moody’s
• ‘A-’ (Strong) rating by Standard & Poor’s

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LMIE – Product Lines

• Aviation
• Casualty/General Liability
• Marine/Energy/Construction
• Crisis Management
• Directors and Officers
• Environmental Impairment Liability
• Financial Institutions
• Legal Expenses
• Professional Indemnity
• Commercial Property
• Trade Credit and Political Risk
• Strategic Assets
• Surety Bonds

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Why choose LMIE?

• Technical capabilities, insurance knowledge and
expertise
• Strong risk management – experienced teams of loss
prevention specialists
• Financial strength and stability:
– A.M. Best ‘A’ (Excellent) rating
– Financial strength and backing of the Liberty Mutual Insurance
Group
– LMIG = 100 years in business: 1912 - 2012
• Commitment to a panel of independent insurance
brokers
• Specialist claims handling and management
• Experienced, multi-lingual local personnel

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• Update and Overview on BBB classes of insurance

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Content

• 1. Overview
• 2. What is BBB and why buy it?
• 3. Add-on’s or Complimentary Policies
• 4. The Underwriting process
• 5. Summary

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1. Overview

Bank’s exposure to Expectation of the

various risks Bank

Find the best risk transfer

solution

Insurance
Products
Market
Costs/Benefit

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1.Overview
The insurance market offers various policies, on named perils basis, and has
demonstrated willingness to innovate and add new policies in line with the changing
needs of Financial Institutions

Director’s
Banker’s
Computer Professional Unauthorised &
Blanket
Crime Indemnity Trading Officer’s
Bond
Liability

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2. What is BBB and why buy it?

• Q: What is Banker’s blanket Bond Insurance?

• A: “BBB” insurance attempts to provide, under one insurance contract,

protection for first party fraud and ancillary actions of theft by third parties.

• Q: Why do you need “BBB” insurance?

• A: Crime is a global problem and is often an unfortunate “by-product” of

social advancement. Crime is on the increase everywhere in the world
and the sad fact is that many Banks/Financial Institutions have only
become alerted to this as a result of a crime loss.
• Because of today’s economic climate there has been a surge in armed
bank raids, fraudulent transfer of funds by employees, theft of cash by
employees, raids on cash in transit and increased document fraud.
• EVERY FINANCIAL INSTITUTION IS VULNERABLE !

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2. What is BBB and why buy it?

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2. What is BBB and why buy it?

• Main Insuring Clauses

• Fidelity Dishonest or fraudulent acts of Employees

• On Premises Loss or Damage to cash and securities from the
Assured’s premises or any recognised place of safe
deposit including the Assured correspondent bank
• In Transit Loss or damage to cash an securities in transit
• Forgery or
Alteration Loss resulting from forgery or fraudulent alteration of
banking collateral instruments; cheques, drafts, bills of
exchange etc.

• Securities Loss resulting from the Assured acting in good faith upon
Securities which prove to be counterfeit, Forged or Lost
or Stolen

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3. Add-on’s or Complimentary Policies

• Computer Crime:

As a add-on to a Banker's Blanket Bond Policy,

Computer Crime Insurance attempts to provide, under
one insurance contract, protection for “electronic funds”
against Crime Risks perpetrated by unidentified
employees or other persons through the Banks/Financial
Institutions computer system(s).

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3. Add-on’s or Complimentary Policies

• Professional Indemnity for FI

• This policy will indemnify the Assured for their legal liability to third party
claimants resulting from a negligent act, error or omission arising out of
the ordinary course of the provision by the Assured of its financial
services.
• Third party claimants are likely to be clients and other parties who are
owed a duty of care in the exercise of the business.
• Legal liabilities of Financial Institutions towards their clients or any
claimant third party arise out of:

 Traditional banking activates

 Online banking and trading
 M&A advisory and consulting services
 Fund and Asset Management

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3. Add-on’s or Complimentary Policies
• Unauthorised Trading:
• Financial losses sustained by the
bank following unauthorised
trading by one of their own traders.
• Trading is defined as unauthorised
when it is:
- in excess of the permitted limits,
Or
- outside of product lines
Or
- not with an authorised person.
Trades must be concealed or falsely
accounted for
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Proprietary and Confidential
Comparison with PI and BBB
- The PI policy covers financial
losses arising from negligence
/errors by the bank, but only if
these losses happens to clients.
- The BBB (fidelity section), on the
other hand, covers losses which
happen to the bank, as long as
these losses are the product of
fraudulent actions committed by
employees with intent (i) to cause
a loss to the bank and (ii) to
improperly benefit from them.
- Some examples
- Allied Irish Banks GBP 500m
- Daiwa Bank: GBP 650m
- Baring plc: GBP 750m
- Sumitomo Corp: GBP 1.600
- Deutsche Morgan: GBP 430m
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3. Add-on’s or Complimentary Policies

• Director’s & Officer’s Liability

The policy is intended to protect D&Os against allegations of wrongful

conduct when they are acting as a company executive
At the same time the policy provides balance sheet protection where the
company has indemnified its D&O’s or where it is itself the subject of a
securities claim

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3. Add-on’s or Complimentary Policies

• TRIGGER:
• Wrongful Act
means any actual, alleged or proposed: act or omission, error, misstatement, neglect or breach of
duty that is committed after the Retroactive Date by an Insured in the capacity in which he is an
Insured, or any matters claimed against an Insured solely because of his capacity as an Insured.

• But what are a Director’s Responsibilities?

The duties of a director have been established through statutes, regulations and case law and can
be broken down into the following areas:

• Duty of Care and Skill

This is a common law duty that requires Directors to act with ‘the care an ordinary man would take I
n the same circumstances on his own behalf’ and with the skill expected from someone with his ‘
particular knowledge and experience’. Where duties are delegated the Director is responsible for
ensuring that the person to whom the duties are delegated is sufficiently experienced, reliable and
honest.

• Fiduciary Duty
Directors must act honestly, in good faith and in the best interest of the company and must ensure
that he does not have any conflict of interest.

• Statutory Duty
There are many statutes that affect the conduct of Directors and Officers including the Companies
Act 1985, Insolvency Act 1986, Financial Services Act 1986, Environmental Protection Act 1990,
Health and Safety at Work Act 1974, to name but a few.

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4. The Underwriting process

Information Stage:

• Proposal Form / Annual Report / Business Plans

• Analyst Reports

• Search engines / News

• Client meeting and/or Conference Calls

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5. Summary
• As a general rule, traditional insurance policies are purchased as follows:
• A combined Comprehensive Crime (BBB/Computer Crime) and
Professional Indemnity Policy
• A separate Director’s & Officers Policy (to avoid coverage for individual
directors being eroded by the higher exposure of a BBB or a PI policy

• The above combinations are most recommended because of:

• - coherence of self-retention and sums insured in case of a loss which
potentially falls under more than one policy
• Benefits of having various policies with same insurer/reinsurer: better
knowledge of risk and not potential dispute/overlap in insurance overage.

• Notwithstanding the above, various other combinations of insurance

policies are possible (such as Standalone PI), depending on each
particular financial Institution’s requirements

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5. Summary
• What level of protection / What level of self-retention??

• The sums insured and the level of retention will ultimately depend on the;
• Perceived level of exposure to financial losses;

• Strategy: what is more important: Severity or frequency?

• Budget consideration: low self-retention will have a negative effect on the

cost of insurance. In contrast, a reasonably high self-retention will free up
cost for purchase of more capacity

• Regulatory requirements and compliance with Basel II

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Conclusion

• One has to consider the insurance program options

• One has to think about alter natives –

Captives/ Corporate Indemnification – Insurance
Policies are usually the easiest way to protect assets
and interests of the company.
• Products are fixed and can be tailor-made to clients
needs.

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