Fine-Tuning Your Approach to Insurance Coverage for Family Offices and Financial Institutions

Family offices and financial institutions have complex insurance needs. To manage their risks, it’s necessary to have multiple insurance policies, and policies are often purchased as special needs arise.

However, a reactive insurance approach can lead to challenges when many insurance policies and high-value assets are involved. For example, you may have policies that provide overlapping coverage, resulting in financial waste. Conversely, your firm may be exposed to dangerous coverage gaps. A proactive approach to insurance can help you secure the coverage you need without suffering from gaps or overlaps.

To see whether there’s room for improvement in your family office or financial institution insurance strategy, ask the following four questions.

1. Can You Consolidate Your Coverage?

Working with as few carriers as possible can simplify insurance. Not only will you have less paperwork and fewer contacts to deal with, consolidating coverage can also help you secure lower premiums while avoiding coverage overlaps. For example, instead of securing various policies separately, you may be able to purchase a commercial package policy that includes general liability, employment practices liability, crime insurance and more – all at a lower rate than what you would pay by purchasing policies separately.

For family offices, insurance consolidation can also be a smart strategy for the family served. A good example of this is when you buy property insurance for a primary home and a vacation home. You may receive a better rate if you purchase coverage for both properties from the same insurance carrier. It may also be possible to extend some of the coverage (such as the liability coverage) from the primary residence’s policy to the vacation home.

Furthermore, if you need to file a claim, the process will be easier because you’ll know who to contact. For example, imagine you fall victim to a wire transfer scheme and are unsure whether you should make a claim under your crime insurance policy or your cyber insurance policy. If both policies are with the same carrier, there’s only one insurer to contact.

In some cases, it may make sense to use multiple carriers based on the rates and terms they offer. In many cases, though, a consolidated approach can streamline coverage.

2. Do You Have Coverage for Emerging Risks?

Twenty years ago, few people were thinking about cyber insurance. Now, many risk managers consider it a necessity. When reviewing your coverage, don’t simply focus on the insurance types that have served you well in the past – also consider what coverage you might need going forward. Consider the following:

• Loss Drivers: How crime, natural disasters, and other loss drivers are changing and how this impacts your insurance needs.
• Social Movements: How social trends, such as the rise of DEI and ESG, could impact your risk management and coverage needs.
• Litigation Trends: How legal trends, such as nuclear verdicts and social inflation, could lead to greater coverage needs.

3. Have the Terms of Your Insurance Policies Changed?

Most insurance policies renew every year, at which point the insurance carrier may change the terms of coverage. It’s important to review these changes to ensure your coverage still fits your needs.

• Has the premium increased? Premium increases are often the most obvious change. A modest rate hike may simply reflect rate trends across the insurance market. However, if the rate hike is substantial, you may like to search for a better value elsewhere.
• Are there new exclusions? Insurers may introduce new exclusions to reduce their exposure to rising losses. For example, Bloomberg Law says insurers have been adding biometric liability exclusions in response to class action lawsuits alleging biometric privacy violations, whereas The Washington Post says some insurance companies are excluding certain natural disaster protections.
• Have the limits changed? Instead of excluding certain losses, insurers may change your limits. Review your insurance policies for changes in limits and sub-limits. Also, be sure that limits continue to be adequate – particularly with recent increases in property values and replacement costs.

4. Are You Working with a Specialized Broker?

Family offices, private equity firms, foundations and financial institutions face unique challenges, as do the affluent clients they serve. A broker who specializes in coverage for financial institutions, family offices and high-net-worth individuals can provide insights into the less common coverage types that you might need. They can also help you access carriers that provide high-limit policies.

The Private Client Group at Heffernan Insurance Brokers can conduct a risk analysis and make coverage recommendations based on your unique exposures. We also provide access to the insurance products you need to manage your risks efficiently. Learn more.