Fidelity insurance

Fidelity insurance

Fidelity insurance protects businesses from financial damages arising from illegal dealings. No conscientious senior executive should ignore the issues of transparency, prevention and the need to insure against this risk. Each year, German businesses sustain damages of several billion euros and the trend is on the increase. Motives vary greatly and are very difficult to identify in advance. Despite this development, fidelity insurance does not have a major role to play in medium-sized enterprises in particular. The product is mostly too complex, although this product can be relevant for every sector and business, however large or small. Any business can fall victim to white-collar crime.

What is insured?
Fidelity insurance protects your business in the event of financial losses due to deliberate, illegal actions, such as theft, embezzlement or fraud. Direct damage due to computer sabotage or betrayal of secrets is also insured.

In addition, many insurers also cover some of the costs associated with legal cases or the investigation of the damage.

Who is insured?
Fidelity insurance covers all employees and members of staff, irrespective of whether they are employed on a permanent or temporary basis. This cover also automatically applies to persons who only work on the company premises on a temporary basis. Cover applies worldwide and to all branches and subsidiaries.

Who provides the insurance?
Only a handful of insurers underwrite fidelity insurance in Germany. When it comes to claims adjustment, the vague legal terms frequently used in insurance conditions quickly separate the wheat from the chaff. The policyholder needs to be able to “trust” the insurer.

Public offering of securities insurance (POSI)

Public offering of securities insurance (POSI)

The term “POSI” (Public Offering of Securities Insurance) mainly stands for the concept for securing against prospectus liability risk in the case of a capital market issue. When it comes to the public placement of securities, the issuer is legally obliged to publish a security prospectus containing extensive information about the opportunities and risks associated with the security. If security prospectuses possibly contain incorrect or incomplete information regarding risks, investors may experience financial losses. This can result in compensation claims by these investors. POSI is a third party insurance, i.e. it offers corresponding cost protection for the examination of third party liability and defending against unjustified claims, while also satisfying justified claims.

The initial public offering (IPO) is particularly risky for issuers of securities, as they find themselves in uncharted territory. As well as the IPO, other capital market measures that require prospectuses, in particular SPOs (Secondary Public Offerings), recapitalisations or debt issuance (bonds) are subject to prospectus liability risk.

Based on current case law (specifically: the Telekom/ German development bank judgement) and a more stringent legal position, in particular a limitation period of up to 10 years, issuers are increasingly purchasing higher insured sums. Industry experts assume that this trend is set to continue. The need for consulting with these hedging products is very high indeed.

What is insured?
POSI insurance provides special cover against liability risks associated with capital market measures. Other insurance held by the company issuing securities, in particular D&O insurance, does not offer sufficient protection and also cannot protect the wide ranging interests of the participants (e.g. first party damages sustained by the issuer, claims from banks)
Accordingly, the following cover elements can be insured:

  • Roadshows and other events
  • Co-insurance of consortium banks released in the “underwriting agreement”
  • Insurance protection for selling shareholders

Who is insured?

  • The company as issuer
  • The company’s officers and employees
  • Any relevant third parties

Who provides the insurance?
Unlike the bond issue market, which is now busy all year round, the market for equity capital issues (IPOs, SPOs, etc.) has really only returned to activity since the end of 2012, although the market for so-called mini-bonds (bonds from medium-sized enterprises) has ground to a standstill. However, the current phase of low interest rates among the central banks means that this alternative funding method using the capital market continues to have its attractions for businesses alongside regular bank loans.
In Germany, the leading D&O insurers are also POSI insurers. The maximum placeable capacity in the German market at present is currently approx. EUR 450 Million.

Professional indemnity insurance for registered professions (PI)

Professional indemnity insurance for registered professions (PI)

Professional indemnity insurance for registered professions, in particular lawyers, notaries, tax advisors, etc. is mandatory. It is a commonly referred to with the acronym “PI” in English.

The German market is characterised by a clientele that depends on established insurers and known insurance solutions to cover professional indemnity requirements in relation to “breaches”. It is difficult for new risk carriers to position themselves in the market, so that the competition is quite restricted. This is evident in the long life cycle of products, whereby, in contrast to D&O insurance, the market is mainly dominated by conditions imposed by insurers rather than brokers. This market is also characterised by largely constant premiums.

In practice, the area of so-called “property cover” is often relevant in addition to the master cover. This is frequently a sensitive issue in procedures following an insolvency order or when dealing with larger clients. Speed, binding information and direct access to underwriters are essential in this context.

What is insured?
The insurance covers the statutory third party liability of the policyholder for a breach when performing professional duties. The amount of the insured sum must at least correspond to the legally required insured sum according to the relevant professional code. It is necessary to consider various criteria, e.g. the legal status of the legal person or any special features of an interdisciplinary professional community.

Who is insured?
It is first necessary to differentiate between policyholders. If the insured party is an individual natural person, he/she is the professional and policyholder. In the case of legal entities, such as a law firm with limited liability, or partnerships, such as a law firm that is a private corporation, this is the business itself. The associates or partners, executive officers and directors who work for companies in the various corporate forms, as well as a company’s employees, are insured. The insured work is the specified professional activity of the insured persons, e.g. as a lawyer and/or tax consultant.

Who provides the insurance?
The market of providers is modest in size. There are about a half dozen serious insurers which differ greatly in terms of their underwriting policy. Two providers dominate the market and can call on capacities measured in hundreds of millions. This is very helpful when dealing with large account enquiries.

Professional indemnity (PI) insurance for service providers

Professional indemnity (PI) insurance for service providers

The market segment for financial loss indemnity insurance for the “free” (unregistered) service sector is very varied. It is commonly referred to with acronym “PI” in English. The terms Errors & Omissions (E&O) and Professional Indemnity (PI) are often used interchangeably.

Because of the wide variety of professions, services and industries represented in the market, the lack of professional regulation and the constant reinvention of the service sector due to general economic developments such as “outsourcing”, it is almost impossible to identify a uniform insurance standard. The growing internationalism of service businesses due to foreign takeovers, the availability of cross-border services or expansion into foreign markets with separate subsidiaries or branch offices have all played their part.

Third-party financial loss insurers offer insurance concepts for many professions, services and sectors. The majority of products are based on general conditions for third-party financial loss insurance, supplemented in each case by specific conditions and risk descriptions appropriate to a given profession or sector. It is possible to supplement the insurance solutions with particular modules, e.g. an office/business liability insurance component, the use of the Internet, or a cyber component (available from a number of innovative insurers). Businesses in the free (non-registered) service sector who purchase third-party financial loss insurance include, typically:

  • Media companies (e.g. advertising agencies, publishing houses, etc.)
  • IT service providers (e.g. software developers, IT consultants, etc.)
  • Corporate consultants and/or interim managers
  • Property service providers (e.g. real estate asset managers, property managers, etc.)

At present, FINLEX does not offer any financial loss liability insurance for architects or medical practitioners.

In most cases, insurance contracts are concluded in the form of annual contracts. However, here too (as with registered professions), it may be necessary to arrange individual insurance (“property cover”) for a particular order during the year, e.g. at the behest of the client (and possibly also financed by the client).

What is insured?
The insurance covers the statutory third party liability (under private law) of the policyholder for a breach when performing professional duties. As a rule, only the activity of the policyholder described in the risk description is insured. The amount of the insured sum can always be chosen freely. When choosing the “appropriate” insured amount and any maximisations, it is necessary to consider various criteria, such as the average order volume or the regularly agreed contractual liability limits.

An important submarket, the corporate consulting and interim management sector, has a special feature in the context of companies facing insolvency proceedings or restructuring through out-of-court agreements in particular, whereby, in addition to third-party financial loss insurance for the consulting service, it may be necessary to place supplementary property cover, personal CRO D&O insurance. See: CRO D&O

Who is insured?
It is necessary to differentiate between policyholders. If the insured party is an individual natural person, he/ she is also the policyholder. In the case of legal entities, the policyholder is the company itself. In this case, the employees who work for the company are also insured.

Who provides the insurance?
If one considers the entire third-party financial loss insurance market, it is evident that – with the exception of a small number of providers on the broker and insurer side that mostly offer modern insurance products for a small clientele (self-employed clients with no/few employees) using Internet platforms – there is little development (supposedly necessary adaptation to existing needs on the client side) and even less innovation or movement. Due to the lack of transparency, many clients purchase average products, despite the fact that there are significantly better solutions available, particularly from some of the newer risk carriers on the German market.

The provider market is relatively large. There are about a half dozen serious insurers, which differ greatly in terms of their underwriting policy.

Third-party financial loss indemnity insurance for financial institutions (FI)

Third-party financial loss indemnity insurance for financial institutions (FI)

Third-party financial loss indemnity insurance for financial institutions (FI) is also widely known as Errors & Omissions insurance. The terms Errors & Omissions (E&O) and “Professional Indemnity (PI)” are often used interchangeably.

We understand the term financial service provider to refer to the following business models in particular:

  • Banks (e.g. private banks, public banks, savings banks, credit unions)
  • Insurance companies
  • Asset managers
  • Fund managers / fund initiators (e.g. asset management companies) for all investment classes, including
    • Private equity and venture capital companies
    • Issuing houses
    • Investments companies
  • Brokers (e.g. insurance brokers, financial service brokers, etc.)

What is insured?
The insurance covers the statutory third party liability of the policyholder for breach of duty when performing professional duties. As a rule, only the activity described in the risk description is insured. The amount of the insurance sum can be basically freely decided – with the exception of minimum insurance sums in the mandatory insurance area (e.g. financial service brokers). When choosing the “appropriate” insured amount and any maximisations, it is necessary to consider various criteria, such as fund or order volume, the agreed contractual liability limits, the spread of risk required by the business model on the basis of investment in different investment classes, client structure, etc.

Who is insured?
As a rule, the insurance relates to a parent company or holding as the policyholder. Depending on the business model, insurance cover also extends to the subsidiaries and fund managers. The organs of the company and the employees who work for the company are also protected by the insurance cover.

In particular, in the case of activities that entail a product liability risk, the personal liability of the persons acting on behalf of the company (usually the company’s organs) and the legal entities (usually the fund manager) are almost impossible to separate definitively. Joint and several liability can even apply. In general this can be resolved with combined D&O/E&O insurance in order to fill any gaps in cover.

Who provides the insurance?
There are about 10 to 15 insurers to choose from when insuring financial service providers. The number of insurers suitable for a basic contract (so-called “management insurers”) is smaller and depends on the client segment.

Cyber insurance

Cyber insurance

Companies can be exposed to damages of many millions and considerable reputational damage if Internet criminals steal data, infect networks with malware or cause servers to crash with denial-of-service attacks. Hardly a week goes by without a report in the media about cyber-attacks. Many of these incidents, like the attack on Sony, are only partly insured because “state-sponsored attacks” (e.g. attacks by secret service operatives) are excluded. Once again, in this relatively new area of insurance it is important to take a detailed look at the relevant insurance conditions.

What is insured?
Companies can arrange comprehensive protection from dangers from the internet. An all-risk policy covers a wide variety of first party and third party damages sustained by companies as victims of Internet criminality (hacking attacks and data loss) or for which they can be held liable by their clients.

First-party damages

  • Loss of confidential data
  • Additional costs incurred due to IT failure or misuse of the telephone system
  • Operational disruption costs, i.e. ongoing costs and loss of revenue.
  • Crisis management and PR costs
  • Costs / compensation for extortion

Third party damages

  • Due to financial losses, e.g. caused by
  • Breach of the German Data Protection Act
  • Loss of data confidentiality
  • Breach of personal rights
  • Breach of Copyright
  • Transmission of viruses
  • Delay in providing Service
  • Compensation due to non-fulfilment
  • Contractual penalties/fines

Who provides the insurance?
All market participants recognise enormous potential for growth, although the market is still in its infancy and the number of policies concluded in Germany so far is quite modest. At present about 15 insurers provide cyber insurance. The level of cover still varies greatly. In some cases, “modular” solutions are possible, so that only certain risk areas are insured.

Kidnap & ransom insurance (K&R)

Kidnap & ransom insurance (K&R)

Yes, it exists, but we don’t talk about it.

Kidnap & ransom insurance is intended both for private individuals and for companies.

It not only protects against financial losses, but also offers services from leading international consulting companies in the area of crisis management and security.

What is insured?
As well as kidnapping, i.e. the seizing or imprisonment of an insured person for the purposes of ransom demands, this insurance also covers extortion, e.g. ransom demands with the threat of killing or injuring a person, damaging property, contaminating products, revealing business secrets or personal information or destroying data by means of computer viruses. In addition, insurance protection is also guaranteed in cases of false imprisonment or the hijacking of aircraft or other means of transport.

Typical cost components:

  • Ransom and extortion payments
  • Loss at the handover of ransom payments
  • Legal defence costs and compensation
  • Consultancy costs (including as part of prevention measures)
  • Travel expenses, salaries, medical and hospital costs, assessors, interpreters, increased security and surveillance costs, etc.
  • Operational disruption costs

Who provides the insurance?
The number of insurers in Germany is limited. The quality and international credentials of the crisis consultant are what count.

In Circular 3/98, the German Financial Supervisory Authority (BaFin) makes it clear that the particularly sensitive nature of this insurance product requires a confidential approach. Thus, for example, the policyholder is obliged to maintain secrecy in relation to the insurance cover (see the latest explanations in BaFin Journal June 2014).

Criminal defense cost insurance

Criminal defense cost insurance

Criminal defense cost insurance and D&O insurance must go hand-in-hand in order to offer company officers sufficient protection. A business can quickly find itself under scrutiny from the Office of the Director of Public Prosecutions. Numerous legal provisions, some of which are constantly changing, make it difficult for business people to maintain an overview. For example, suspicion of tax evasion can lead to accusations of a criminal act, or a chief executive may be found wanting in terms of due diligence.

In many cases, criminal investigations and civil law claims run in parallel. Injured parties often await the results of state legal investigations before deciding to take a civil action against an alleged perpetrator. D&O insurance often contains a legal protection element for this reason. However, this is often inadequately formulated. This is why legal protection insurance for industry guarantees separate, comprehensive legal protection for the company’s employees.

What is insured?
Criminal defense cost insurance guarantees insurance protection specifically in cases of

  • Suspicion of tax fraud
  • Accusations of corruption
  • Investigations into alleged inadequacies in occupational safety after an accident at work
  • Accusations in relation to data protection
  • Company closures

and also affords preventive legal protection before investigations are initiated.

Who is insured?
The insurance cover usually encompasses all of your employees and members of the company. Cover should apply worldwide and to all branches and subsidiaries.

The important thing here is to have a fully functioning network of defence lawyers.

Who provides the insurance?
Only a handful of legal expenses insurers still underwrite criminal defense cost insurance in Germany. Because of the sharp rise in the number of claims in recent years and the increasing damages awarded, insurers have become extremely restrictive in the provision of insurance cover for certain sectors, such as the banks.

Employment contract defense cost insurance

Employment contract defense cost insurance

Employment conditions can be complicated as the world of work is becoming increasingly complex. In addition, opinions relating to the rights and obligations arising from an employment contract can frequently differ. This is because employers and employees often see things from different perspectives. In labour law, it is always necessary to respond immediately. Taking labour law disputes to the courts can be an expensive business. Even getting advice from a solicitor prior to a dispute does not come cheap.

What is insured?
Employment contract defense cost insurance covers the following specific claims

  • Procedural costs and the costs of legal services associated with the protection of interests, both judicial and non-judicial
  • Claims for any necessary interpreting and translation services within reasonable limits
  • Claims for the necessary initial advice when an investigation is pending, if there is a threat of legal proceedings in connection with a termination.

Important: It is necessary to agree in advance with the insurer on costs with respect to the question, what precisely is meant by “within reasonable limits”.

Who is insured?
This cover involves personal insurance protection for the manager, who is himself the policyholder.

Who provides the insurance?
A sufficient number of insurers underwrite legal protection on employment contracts.

D&O self-insured retention insurance

D&O self-insured retention insurance

Obviously, the D&O excess insurance policy should be purchased from the insurer who also provides the D&O corporate insurance. Almost every insurer who offers D&O insurance can also provide appropriately tailored D&O excess insurance. When it comes to the design of the insurance, various criteria need to be taken into consideration, so that in some cases it may make sense to place the D&O excess insurance policy with a different insurer from the D&O corporation insurance (even if this seems more complicated “at first glance”).

Personal D&O insurance

Personal D&O insurance

Personal D&O insurance is the right choice for managers who want additional security in addition to existing (but possibly insufficient) D&O corporate insurance or because the company does not have D&O insurance.

What is insured?
The insurance cover is similar to D&O corporate insurance. The main difference is that only one person is insured and no other person can access the insured amount.

If a manager is accused of breach of duty and a claim is made for compensation for the financial loss resulting from the alleged breach (insured event), it is the task of the D&O insurer to examine the liability issue, to defend against unjustified claims against the manager and – if the defence fails – to pay out the compensation on behalf of the manager.

In addition to these typical functions of third party liability insurance, there are generally also other cover components that can protect the manager in certain situations (e.g. assumption of legal costs in the event of premature termination of a contract of employment in advance of a compensation claim, criminal-law protection, cost of reducing reputational damage, etc.).

Who is insured?
The insured party (and policyholder) is solely the manager in the relevant insured position.

Who provides the insurance?
At present there are roughly a handful of insurers among the many D&O insurers in Germany who are capable of offering D&O individual insurance cover. As a result, the insurance sums currently available “per person” do not even come close to the amount that companies can purchase.

Personal CRO D&O insurance

Personal CRO D&O insurance

Personal CRO D&O insurance is suitable for interim managers at companies undergoing restructuring due to threatened insolvency or out-of-court settlements who wish to provide for their own protection (possibly in addition to inadequate or collateral D&O corporate insurance arranged by the company in crisis).

What is insured?
The insurance cover is similar to D&O corporate insurance. The main difference is that only one person is insured and no other person can access the insured amount.

If an interim manager is accused of breaching obligations and a claim is made for compensation for the financial loss resulting from the alleged breach (insured incident), it is the task of the D&O insurer to examine the liability issue, to defend against unjustified claims against the manager and – if the defence fails – to pay out the compensation on behalf of the manager.

In addition to these typical functions of third party liability insurance, there are generally also other cover components that can protect the manager in certain situations (e.g. criminal-law protection, cost of reducing reputational damage, etc.).

Typically, interim managers do not have a contract of employment with the company they work for. In formal terms they usually have consulting contracts: depending on the scope of the consulting contract it is necessary to check whether third-party financial loss insurance is required for consulting services in addition to the personal CRO D&O insurance.

Who is insured?
Insurance cover can be extended to interim managers of companies who are facing insolvency proceedings or restructuring through out-of-court agreements (Chief Restructuring Officers, Liquidation Managers, etc.). From a legal perspective, such managers must perform an “organ-like” function (CEOs, Directors, General Representatives, etc.) The insured person (and policyholder, but not necessarily the premium payer) is generally solely the relevant interim manager in the insured function identified.

Who provides the insurance?
At present there are barely a handful of insurers among the many D&O insurers in Germany who are capable of offering CRO D&O individual insurance cover. As a result, the insurance sums currently available “per person” do not even come close to the amount that companies can purchase. If necessary, it is possible to purchase additional insurance cover through typical “excess carrier insurance companies”.

D&O corporate insurance

D&O corporate insurance

D&O corporate insurance is now a regular feature of a company’s insurance portfolio, both in medium-sized enterprises and in large businesses and financial service providers. 

What is insured?

If a manager is accused of breach of duty and a claim is made for compensation for the financial loss resulting from the alleged breach (insured event), it is the task of the D&O insurer to examine the liability issue, to defend against unjustified claims against the manager and – if the defence fails – to pay out the compensation on behalf of the manager.

This means that when a claim is made, the right to the insurance benefit lies with the manager himself. When a claim is made, the company itself does not generally have any beneficiary rights, even though in many cases it is the claimant and pays the premium (exception: in some cases, D&O corporate insurance includes cover components that can also be available to the company). The costs to the company for the legal pursuit of managers must be borne by the company itself and cannot be insured elsewhere.

In addition to these typical functions of third party liability insurance, there are generally also other cover components that can protect the manager in certain situations (e.g. assumption of legal costs in the event of premature termination of a contract of employment in advance of a compensation claim, criminal-law protection, cost of reducing reputation damage, etc.).

Who is insured?

In most cases, the company arranges insurance in favour of all managers on a general basis (without identifying them by name) and pays the insurance premium as a tax-deductible operational expense (D&O corporate policy). Normally the managers of all subsidiaries worldwide are insured.

Managers and therefore “insured persons” in the context of D&O insurance are typically:

  • Members of executive bodies (board, executive management, etc.)
  • Members of control bodies (supervisory board, advisory board, etc.)
  • Other groups that perform management functions or that have a special position in the company (general agents, official signatories, executives, compliance officers, etc.)

In individual cases, a D&O corporate policy can be backed up with “D&O supplementary products” such as a separate D&O corporate policy in favour of a departing manager or (exclusively) in favour of the supervisory board, the managers of a group parent company, etc.

In addition a PTL- (Fiduciary) insurance covers the unaffiliated assets of a pension trust. With a combined D&O- und E&O-coverage the pension trust and its managers are protected.

Who provides the insurance?

Germany now has a large number of D&O insurers, currently around 35. Because companies are increasingly required to implement international insurance programs (so-called master and local policies) due to their global activities and more stringent compliance requirements, the number of possible “management insurers” is realistically less than ten.

D&O individual insurance

D&O individual insurance

In certain situations, a manager can (or must) supplement the insurance cover that he (generally) enjoys through a D&O corporate policy with personal “D&O ancillary products”, e.g.

  • D&O self-insured retention insurance
  • Personal D&O insurance / D&O individual policy
  • Personal CRO D&O insurance for managers appointed on an interim basis to companies in crisis

As a rule, the premiums for a D&O individual insurance policy must be paid for by the manager himself.

Warranty & indemnity insurance (W&I)

Warranty & indemnity insurance (W&I)

The market for corporate transactions has once again grown considerably over the last year. As a result, the demand for insurance solutions for M&A risks in the form or warranty and indemnity insurances (W&I) has risen dramatically in recent years.

What is insured?
W&I involves securing actual losses as a consequence of warranty or indemnity promises. Both purchasers and vendors in a corporate transaction can conclude a W&I, which should come into force if a warranty promise made by the vendor proves to be incorrect. This is because if the guarantee given by the vendor (e.g. in terms of the correctness of tax processes or the unencumbered nature of shares) is incorrect, the vendor is fundamentally liable to the purchaser due to the contractual guarantee. It is mainly possible to insure unknown risks covered by warranties. Risks that are known to the vendor and purchaser, and that are usually the subject of derogations, can only be insured in exceptional cases.

Special subtypes of W&I include:

  • Tax Indemnity Insurance Protection against unexpected tax effects
  • Litigation Buyout Insurance Protection against subsequent or threatened legal disputes
  • Environmental Insurance Protection against environmental risks
  • Special Situation Insurance Protection against known risks identified in advance

Who is insured?
In the event of liability due to defective warranty, if the vendor is the policyholder, he shall be entitled to make a claim against the insurer for indemnification against liability claims by the purchaser.

In the event of liability due to defective warranty, if the purchaser is the policyholder, he shall be entitled to make a claim against the insurer in compensation for the damages incurred.

In the final analysis, the purpose of Warranty & Indemnity Insurance is to protect the interests of vendors and purchasers, irrespective of which of them has concluded the insurance contract.

Who provides the insurance?
A handful of insurers offer their capacity in Germany. The insurers now have the decision-making underwriters in Germany, so that time-consuming communications via London are a thing of the past. In the past, the transfer of risk often failed because an insurance solution was only addressed by the parties at a very late stage as part of M&A preparations and the insurers themselves demanded extensive underwriting. Accordingly, the insurers are now guided by the available information from due diligence. The costs of W&I are generally between 0.9 and 2 % of the sum insured, although there are signs of a drop in insurance premiums in recent times.

Employment practices liability insurance (EPL)

Employment practices liability insurance (EPL)

Compensation claims by employees against their employers or managers have increased since the 1990s, particularly in the United States, but also in other countries with a Common Law legal system (e.g. the United Kingdom, Canada and Australia), explosive growth.

What is insured?
In the United States, for example, the following compensation claims by employees and/or equality authorities are covered:

  • Wrongful termination of employment
  • (Sexual) harassment in the workplace
  • Discrimination in the workplace on the basis of race, ethnicity, religion, gender, nationality, age, disability, family status, etc. (employment-related discrimination)
  • Wrongful failure to employ or promote and wrongful deprivation of a career opportunity
  • Defamation and wrongful infliction of emotional distress
  • Invasion of privacy

Employment practices liability insurance is therefore particularly recommended for companies with subsidiaries and branch offices in the USA, United Kingdom, Canada and Australia.

Who provides the insurance?
In Germany, EPL insurance is typically the preserve of Anglo-American insurance companies. It is often recommended that foreign companies belonging to the policyholder should have the contract conditions set down in English.

Directors & Officers insurance (D&O)

Directors & Officers insurance (D&O)

The liability risks of managers under civil law can be covered with a Directors & Officers insurance (D&O). This has now become established as a kind of “mandatory insurance” for every manager. Different versions of D&O insurance have established themselves in the insurance market in recent years.

Managers’ defense cost

Managers’ defense cost

In the best-case scenario, the legal protection for managers comprises criminal-law protection, employment contract legal protection and financial loss liability protection. The latter is not entirely necessary if sufficient D&O insurance cover is in place. Combination products are often available.

However, we place no value in legal protection products, such as D&O premium action legal protection insurance or a combination of D&O and financial loss legal protection insurance, which is why we do not actively offer these products.

Financial loss legal protection insurance may make sense on a standalone basis if the company is unable to arrange any D&O insurance or the D&O insurance has so many cover limitations attached that at least the defence cost component needs to be strengthened in favour of the company.

Philosophy

Making complicated matters easy without losing an eye for detail.

The “Financial Lines world” is complex and there is no prospect of a standard for general conditions. Because of the intense competition between the many market participants, products can have a short life span and are exposed to an extremely international environment and frequent legislative changes. It is almost impossible for individuals to maintain an overview and to recognise, evaluate and implement all relevant current market and product developments.

FINLEX aims to take on this task on your behalf. This is our commitment. Fairness, transparency, transfer of knowledge and pioneering spirit are not just empty words for us, but rather a corporate philosophy that we practice day by day.

Performance promise

We offer you the efficient combination of theory and practice!

We probe the detail of complex liability situations, abstract risks and nested contracts. This “scientific approach” and high quality is the basis for our activities. However, all of this would be practically worthless if we did not create transparent products and appropriate solutions for our clients. Practical implementation is the most challenging aspect. Making complicated matters easy is part of our philosophy. In specific terms, this means for you:

  • The basis of our work is the continued development of needs-based insurance solutions in order to achieve a maximum level of security.
  • Our risk analysis (e.g. synopses and assessments) illuminates all the relevant aspects of your situation in detail and includes proposed solutions.
  • We give you the tools to enable you to manage all financial lines issues with confidence and to release yourself from any liability in relation to your client.
  • Too much information can be overwhelming. Allow us to act as your filter and to keep you up-to-date proactively.

Thanks to its many years of experience in this sector, the FINLEX team has already demonstrated its ability to fulfil this promise. It is also important to recognise the limitations of the relevant markets, so as to find the most appropriate and efficient solution as quickly as possible.

Sebastian Klapper

Sebastian Klapper

+49 (0) 69 8700 142 11
+49 (0) 151 4222 132 4
sebastian.klapper[at]finlex.de

Managing Director


Economist Sebastian Klapper specialises in corporate finance and has a master’s degree in business law (LL.M).

He has worked for many years in the insurance business and is an experienced expert in Financial Lines at both the national and international level. As well as having several years of responsibility within the Financial and Professional Services business unit with a major international broker, he spent a number of years as a risk management consultant for banks and financial institutions in London.

His experience and know-how in the area of capital market and transaction risk are particularly noteworthy. Completed in 2013, his master’s thesis was also dedicated to the subject of prospectus liability and analysed the transfer of risk for businesses under the new legal conditions. He has been responsible for some pioneering work in designing corresponding insurance programs and the management of loss cases. This involved publication of a number of specialist papers and delivering lectures at seminars and conferences.

Tomasz Kosecki

Tomasz Kosecki

+49 (0)  69  8700 142 12
+49 (0) 151 4222 132 2
tomasz.kosecki[at]finlex.de

Managing Director


Tomasz Kosecki has a BA degree in business administration with a focus on insurance business management. He has also successfully completed a master’s degree in business law, focusing on “restructuring and corporate succession” (LL.M.).

Having worked for an industrial insurance broker at a listed financial services company as part of his studies at the Berufsakademie Mannheim (now the Duale Hochschule Mannheim), in 2007 he moved to the Financial & Professional Services Division of a leading broker. Up until the founding of FINLEX GmbH, he held regional responsibility for the Western Region and most recently managed the Middle Market.

As well as the core areas of D&O and Fidelity Insurance, his key areas of expertise lie in capital market risk, professional indemnity and the insurance of risks in “crisis situations”. He has 12 years of experience in these areas and is a nationally and internationally experienced expert.

Christian Reddig

Christian Reddig

+49 (0) 69 8700 142 13
+49 (0) 151 4222 132 3
christian.reddig[at]finlex.de

Managing Director


Christian Reddig is a business economist and specialises in insurance (Diplom-Betriebswirt BA).

He has been working as an insurance broker in the insurance industry for 15 years, focusing on Financial Lines. As well as working for industrial clients within the Financial & Professional Services Division of a large international broker, he has also managed the accounts of financial services providers (private equity and venture capital companies, investment management companies, banks, insurance companies, asset managers, real estate asset managers, etc.).

He has particular experience, expertise and implementation capabilities in consulting, structuring and the placement of insurance solutions for capital market and transaction risks (stock market flotations, bond issues, acquisitions, mergers, spin-offs, etc.).

Christian Reddig has addressed various seminars and conferences on subjects such as risks and insurance solutions for financial service providers or for consultants and managers in restructuring situations.

Dr. Stefan Steinkühler

Dr. Stefan Steinkühler

+49 (0) 69 8700 142 14
+49 (0) 151 4222 132 5
stefan.steinkuehler[at]finlex.de

Member of Advisory Board


Dr. Stefan Steinkühler is an attorney-at-law who focuses on insurance and liability law.

He has many years of experience in the insurance business and is an experienced expert in financial lines at both the national and international level. In addition to heading up the Financial & Professional Services Division for a major international broker for several years, he practiced as an attorney-at-law in Düsseldorf for a number of years, specialising in industrial insurance. His clients also included insurance brokers.

Before studying law, he trained as a banker with a large private bank, also completing a traineeship before working as an intern.

His experience in designing international insurance programs and handling D&O, E&O, FI and product liability claims cases should also be highlighted. Following his legal studies, he specialised as an advisor in the area of financial lines and legal protection. He has also published several specialist articles and has delivered papers at seminars and conferences. In his dissertation on “The legal importance of corporate principles”, Dr. Steinkühler dealt with questions regarding the implementation and liability of published principles of corporate governance. As part of his postgraduate studies, he earned a “Masters in Insurance Law – LL.M.” and also successfully completed a specialist legal course in insurance law.

Manager liability

Manager liability

Managers have enormous responsibility to their company, shareholders, banks and other third parties (“stakeholders”). If they fail to meet these responsibilities (adequately), leading to financial damage, then they must personally provide compensation (“manager liability”). Continuously more stringent liability provisions and an aggressive claims mentality mean that several thousand compensation claims are made against company executives each year in Germany alone.

Irrespective of a civil law suit (or even in advance of such a suit) managers have to deal with criminal prosecutions or associated investigations, e.g. if they are accused of breach of trust.

First-party cover for companies

First-party cover for companies

In the case of first party insurance, the insured company and beneficiary are considered together, i.e. the insurer processes the immediate damages directly with the policyholder.

Almost two-thirds (63 percent) of companies affected by white collar crime in the last two years categorised the crime as theft or embezzlement. 54 percent of the companies affected categorised the crime as fraud and breach of trust. In addition, another important market for the future is starting to grow up around cyber insurance. This involves an all-risks policy that secures both first party claims and third party claims resulting from hacking attacks and data loss.

FINLEX offers the following insurance products in this context, although cyber insurance should be categorised as a mix of first party and third party liability insurance due to the comprehensive nature of the cover involved.

Advisor’s liability

Advisor’s liability

In Germany, the service sector accounts for around three-quarters of all jobs and contributes 70 percent of overall added value. This all-important sector comprises numerous interest groups and a wide variety of professions, which in turn are closely associated with the manufacturing sector. On the one hand, there are many well-established, traditional professions, such as the registered professions, while on the other hand, new service providers are constantly arriving on the market in this digital age. The relevant insurance markets have either existed for decades or have to be adapted to cater to the newly arising needs. An understanding of risk, a level of expertise and access to the market are all vital in order to cater to the demanding clientele and their specific individual risks.

Capital market and transaction risks

Capital market and transaction risks

The protection of capital market and transaction risks is mainly characterised by the fact that the narrow time slot sometimes available for the relevant measure in an often volatile market can require risk to be transferred at short notice. In addition, such measures are often extremely complex and require tailored, needs-based protection for the different interest groups. There is a regular need for situation-based presentation and management by a strong risk consultant who has experience in this area.
The insurance solutions are generally long-term project policies with a one-off insurance premium.

Advisory

Advisory

Working alone will add value. Working together will multiply it. (Arab proverb)

Our service for insurance brokers is based on the practical insight that efficient needs-based support in strategically important insurance areas is vitally important in a fluid highly competitive market environment. This is particularly the case in the area of manager liability, as this affects a company’s decision-makers directly. Hence, D&O is a door opener, while at the same time also involving a risk regarding the business relationship with the company. This is particularly the case when consulting, ongoing support or claims processing fails to live up to the expectations of the people at the top in the company.

The fine balance between good client support, one’s own profitability and possible conflicts of interest when a claim is made can be a major challenge for many insurance brokers. It is very difficult to build up one’s own resources for the Financial Lines sector. This is not least because of the fluid market phase and the associated decline in income from fees.

FINLEX can offer you the following solutions to help with this balancing act:

  • We offer our cooperative brokers an online information, sales and placement platform for the financial lines sector.
  • We are partners, not guardians of esoteric know-how, which is why we are happy to share our knowledge with you, contributing to your independence.
  • We can help you in every market phase with defined standards and strong products. This also means that we can help relieve you of the burden of liability to your own clients.
  • We take a transparent approach to fee structures and guarantee you a fair share of the overall fee, which will correspond to at least the usual standard fees from insurers.
  • As an option, we can provide active support to end users, but only if this accords with your wishes and will not lead to conflicts of interest with other partners. Otherwise we shall remain in the background as service providers.
Broking

Broking

We believe that top quality advice, extensive knowledge of the market and highly developed implementation skills are the key factors for a specialist insurance broker in achieving excellent results for his clients. FINLEX aims to use these key factors to the advantage of its clients in every mandate. Consulting only makes sense if it produces a final decision. To enable you to reach a decision, we offer needs-based and objective advice and specific recommendations for action (base advice).

As brokers, we operate in the insurance market solely in the interests of our clients. We mainly achieve this through direct access to the underwriters and decision-makers of the insurance companies relevant for you. We only place insurance contracts with insurance companies who are approved by the responsible supervisory bodies in Germany and consider the ratings of these insurance companies and their financial strength when recommending placements. It remains of key significance for the recommendation or choice of the right insurer for your needs that the relevant insurer should accept our leading insurance conditions, which are often individually optimised to your particular needs.

Other decision-related criteria will also be considered in our recommendation, such as, in particular, whether the insurer has a long history of involvement in the market, whether it operates a separate claims department, whether it has the ability to implement international insurance programs and, last but not least, whether it offers the best price/performance ratio for your needs.

The regular optimisation of insurance contracts to meet your individual needs and requirements and to reflect the options available in the market is a key part of our work as insurance brokers for you.

Claims

Claims

Financial losses are generally complex – not just in terms of liability, but also, in particular in terms of cover. It is not uncommon for “off-the-peg” insurance products to cause problems when it comes to handling claims. In this case, mistakes are usually already made at the underwriting stage.

Network
As well as gathering its own experience in handling financial losses, FINLEX also has access to a specialist network of experts and lawyers it can consult for advice on liability and cover-related issues. This network also includes defence lawyers. The main thing the lawyers in the network have in common is that they basically never act on behalf of the insurer.

Assessment
FINLEX will also be happy to assess “external” D&O claims, offering a second opinion. However, the claims service is primarily available for policyholders and cooperative partners supported by FINLEX.

Monitoring
D&O claims in Germany are up to 80 percent internal liability claims. These claims are characterised by the fact that the company that sustains the damage makes a claim against one of its officers, usually a director or chief executive. If the officer is still employed by the policyholder, tensions between the parties are almost inevitable. The legal nature of D&O insurance as a contract with a third party beneficiary becomes fully apparent at this stage. The insurer supports the policyholder and the chief executive in offering a defence against the claims made.
Internal liability claims often entail an emotional aspect. Signs of “internal wrangling” are often apparent. It can be beneficial for the parties to have a go-between when claims are processed in order to avoid the delays frequently encountered. This monitoring is part of the service offered by FINLEX.

Processing
FINLEX provides support before a claim is made, i.e. before claims are pursued, in order to avoid possible problems when a claim is processed (e.g. breach of notice requirements and other possible breaches of obligation). Claims should be processed with the aim of resolving any disputes as quickly and smoothly as possible. This makes it possible to avoid unnecessary escalations and protects the manager and the company from negative headlines.

Transparency

For FINLEX, open and honest dealings with business partners provide the foundations for shared success.

FINLEX aims for complete transparency.

Even without statutory regulation, we are happy to disclose our fee structure. We can assure our business partners that, other than the listed revenues, we receive no additional broker’s commission, overriders, etc. from the insurance provider side, either directly or indirectly.

For us, transparency does not just mean disclosing external agreements. FINLEX is independent, i.e. there are no cooperation partners providing financial backing in the background. This is the only way to ensure a long-term, trust-based relationship with our business partners.

Specialist broker

Yes to pioneering spirit and innovation, but no to experimentation

Whether we are advising an insurance broker or providing insurance solutions directly in a selected niche business, we only do what we do best: Financial Lines.

FINLEX concentrates solely on financial loss insurance and only draws up insurance solutions for the risks and customer groups that we have actually succeeded in “penetrating”.

FINLEX aims proactively to negotiate and implement market-leading, exclusive insurance concepts for all risks and customer groups. We are often directly approached by our clients for such solutions. Cooperation with all the relevant insurers in a spirit of trust is the basis for ensuring our clients have access to the best possible insurance protection.

Product innovations not only distinguish special brokers, but are actually expected from them. Being a specialist broker means not only developing new insurance concepts for commercial purposes and introducing these to the market, but also examining the actual benefits of these concepts in a critical way and dealing with them in a responsible manner using the superior knowledge that provided the basis for the products in the first place.

An insurance agreement is only put to the test when a claim is made. However, the outcome from Financial Lines damage claims is often not as expected from “classic” insurance policies: these claims are more abstract and are more difficult to “manage” in procedural terms because of the dependency on other third parties. Different interests (e.g. in the case of D&O claims) and complicated legal issues make targeted claims processing more difficult. FINLEX ensures that insurance agreements are allowed to “prevail” and that insurers are made to keep their promises.