A family of insurance lines covering the legal, financial and reputational risks of companies and their executives, including D&O, professional indemnity, crime and transaction liability.
Financial lines, an English term now in common use in the global market, bring together the classes of insurance that cover not physical damage but legal, financial and reputational risk. Several complementary sub-classes can be distinguished. Directors' and officers' liability, known as D&O, protects individuals in management positions against personal liability claims. Professional indemnity, known as E&O or PI, covers the errors and omissions of service providers in the exercise of their activity. Crime insurance covers internal and external malicious acts, including misappropriation. Financial institutions liability covers the risks specific to banks, asset managers and securities firms. Finally, warranty and indemnity insurance, known as W&I, protects mergers and acquisitions against inaccurate seller representations. These classes share a pronounced cyclicality, a long-tail loss development and a dependence on the judicial system rather than on physical hazards. They constitute a sensitive barometer of the litigation and regulatory climate, particularly in the United States, where social inflation and nuclear verdicts exert structural pressure on costs.
An asset manager is sued by aggrieved investors who allege that its executives concealed information about the valuation of certain funds. The claim simultaneously engages the D&O policy of the corporate officers for their personal liability and the financial institutions policy for the company's liability. The professional indemnity policy covers in parallel the errors committed by the portfolio managers in the exercise of their management activity. This single loss mobilizes three branches of financial lines, illustrating the complementarity and the boundary issues between covers.
financial lines, assurance lignes financières, branches financières