Insurance for Investment Managers

We’ll start with a broad overview of the various covers investment management funds should carry. We’ll then walk through the most critical of these covers. Here’s an easy-to-scan table below for the insurance covers that hedge funds should have:

Let’s talk about the most important of these covers. There are 3 absolutely key covers that all investment managers should have. These are: i) Professional Indemnity Insurance, ii) Directors & Officers (D&O) Liability Insurance, and iii) Cyber Insurance.

Professional Indemnity Insurance protects you from a wide range of business-related lawsuits. This can cover you from lawsuits alleging negligence in mismanaging funds, breach of fiduciary duty, and more. Limitation of liability agreements are not full proof, and if legal action is taken against your fund, it will be very expensive to defend. Professional Indemnity Insurance takes this weight off your shoulders by covering lawyer’s fees, and the costs of damages/settlements.

Directors & Officers (D&O) Liability Insurance is just as crucial. You need to protect your board directors and officers from lawsuits personally targeting them. If you have legal action taken against you, it could target both your corporate entity, and also personally target your company directors. Directors who are sued personally will have their personal assets like their home, car, savings, and more at risk of being claimed as damages by the other party. It’s therefore essential that hedge fund directors have D&O Insurance to shield their personal assets from litigation.

Cyber Insurance covers you against cyber breaches. Investment management firms are prime targets for cyber breaches. Cyber Insurance covers many different costs to help you get back on your feet after an attack. It covers the costs of hiring IT consultants to diagnose and correct the breach. It also covers the costs of restoring your IT systems, removing ransomware, and more.