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What types of insurance do Electronic Money Institutions (EMIs) need?

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With the growth of fintech and digital currencies, many non-bank payment providers now offer online services to transfer money. Among them are Electronic Money Institutions, more commonly known as EMIs.

EMIs provide an alternative to a business bank account and are useful for smaller businesses and sole traders, who are often excluded from traditional business banking but can operate via e-money accounts. EMIs are authorised and regulated by the FCA and can issue e-money and provide associated payment services.

Innovation and protection

Every new business model involves risks that must be mitigated with appropriate insurance. At Elmore, we typically split EMI insurance into two main areas:

1. Specialist fintech insurance
2. Commercial office package insurance

Under these broad headings we provide a range of risk transfer policies. Let’s take a closer look at the types of insurance that EMIs should consider.

Breakdown of specialist fintech insurance

• Cyber Insurance
This covers the technology, legal, public relations and other costs involved in responding to a cyber event. It may involve direct financial loss from business interruption, extortion, data and payment card industry (PCI) fines and penalties and defence when a claim is brought against the company for cyber events

• Professional Indemnity Insurance (PII)
PII covers negligent or wrongful professional service claims that result in third parties suffering injury, damages or financial loss. Insurance will cover the costs and expenses in defending a professional claim against a company and any damages if the claim is successful.

• Directors and Officers (D&O) Liability
D&O cover protects directors and senior managers against claims for wrongful or negligent acts in the execution of their duties. Claims may be brought by disgruntled shareholders, employees, creditors, competitors, suppliers, customers or by a regulator.

• Theft/Crime Insurance
This offers protection against theft, fraud and other dishonest acts by employees or third parties that damage the business and its reputation.

Breakdown of commercial office package insurance

• Employer’s Liability Insurance
All businesses should have cover against the cost of compensation claims arising from any illness or injury sustained by an employee as a result of their work for the employer.

• Public & Products Liability Insurance
Services or products provided to the public may lead to claims if the service/product is deemed to be sub-standard, damaging, or misleading. Insurance will cover the cost of claims made by members of the public in connection with business activities.

• Property Insurance
This covers damage/loss to buildings, contents, portable equipment and other property as a result of fire, flood or theft.

Are you covered?
Elmore helps EMIs and other fintechs stay protected in the digital economy. If you would like a risk assessment of your business, we can conduct a review, highlight any gaps in your cover and then provide appropriate insurance. See the full range of our services and please get in touch if you would like more information about how we can help you.

Written by Tom Abbotts – Cyber, Technology and Fintech Team Leader of Elmore Insurance Brokers.

Elmore Insurance Brokers Limited.

Risky business: finding insurance in the volatile crypto marketplace

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The last two years have been tumultuous for cryptocurrency. From its peak in November 2021, the market has shed more than $2 trillion in value, and some leading crypto companies have been either deeply wounded or gone under. For example, the cryptocurrency platform Celsius Network is a recent casualty, filing for bankruptcy this July, while other crypto companies have announced layoffs and frozen withdrawals.

The ever-changing Web3 space is risky for entrepreneurs and investors alike, and unfamiliar territory for insurers. So, what cover is available for Web3 firms through the peaks and troughs, and how are insurers responding?

Crypto

The quest for insurance

Web3 firms the world over have struggled to protect their nascent and volatile industry. Insurers have mainly stood back and monitored developments, wary of the unknown but also keen to explore opportunities for new Web3 business lines. While cold storage insurance is widely available for digital assets, insurers have found it challenging to cover more specialised risks such as cyberattacks, internal and external crime, professional liability, and directors and officers liability.

Although conventional insurers remain cautious when considering cover for crypto firms, the landscape is changing. Bermuda-based Relm Insurance is one insurer that has made a name for itself in both the crypto and insurance communities. Relm began life as a captive insurer for its parent, Deltec bank, an institution used by many crypto businesses for the storage of their fiat treasury. In just a short time, Relm has become a leading insurer of hard-to-place digital asset risks and recently achieved an A rating from the US rating agency Demotech.

For more established insurers, with recognised S&P/AM Best A ratings, which can sometimes be a deal breaker for institutional businesses, risk appetites are growing. Beazley, which manages several syndicates at Lloyd’s of London, recently opened a pilot using its Lloyd’s innovation budget to determine whether digital assets is a class they could write more widely for cyber and professional indemnity. Beazley has also launched CryptoGuard, a specialist D&O solution to protect senior executives in crypto companies, reflecting a growing interest in this sector.

AM Trust is another example of an insurer that is now more receptive to writing crypto insurance, while Avertas calls itself “The world’s first cryptoasset insurance company.” Other insurers will follow as crypto becomes more mainstream despite its inherent volatility. Indeed, crypto insurance is sure to become more important given the instability of the cryptocurrency ecosystem and the need for balance sheet protection from operational risks.

What types of insurance do crypto businesses need?

The latest crypto crash comes as a reminder that digital assets carry extra risks and that regulatory uncertainty exacerbates those risks. Crypto businesses and insurers must focus on the following:

Professional liability – protection against claims from third parties who allege they have suffered a loss as a result of a failure in professional/technology services
Cyber– protection against cyberattacks, business interruption, ransomware, denial of service and liability from a cyber event
Crime – protection against losses resulting from employee or third-party fraud
Directors and officers’ liability (D&O) – protection for senior executives who are liable for the decisions they take on behalf of their companies.

Crypto and the future

Whatever the highs and lows of crypto, it will play a growing role in the global economy and should be firmly on insurers’ radars. Insurers must continue to monitor crypto developments and deepen their understanding and knowledge of digital assets. As an insurance innovator and digital specialist, Elmore is helping to guide the industry and manage risk in this fast-moving marketplace.

Written by James Love – Junior Client Executive of Elmore Insurance Brokers.

Elmore Insurance Brokers Limited.

Reflections on Europe

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Francisco Monteiro, Managing Director of Elmore Europe, discusses the growth of the Lisbon office and the priorities and challenges for insurance across the continent

Elmore Europe has been operating for more than a year now. Why did you create a European hub in Lisbon?

Five years after launching in the London Insurance Market, our founder and MD Simon Gilbert decided to target Europe and build on Elmore’s success. Brexit, of course, was a key consideration. Like other insurance businesses, we needed to think long-term and ensure we could operate across the EU. Establishing a European hub gave us the required legal foothold, and one of the reasons for choosing Lisbon was because of its highly skilled workforce. Simon also had connections with Portugal as well as good relationships with the local broker community. Our Lisbon hub means we have passporting rights across Europe, and most of our clients – for now – are outside Portugal.

What are your focus areas and plans for growth?

Financial lines are our main focus and we offer all the services that we provide in London. Amongst others, we cover professional liability, management liability, cyber insurance, financial institutions insurance, and fintech insurance. Although the team in Lisbon is still quite small, Elmore in London provides backup and we intend to hire more staff locally. We have plenty of submissions coming through so will definitely need to expand.

Our current designation is ‘insurance agent’ but we’ll become an authorised broker in the near future. We’ll be following in the steps of the London office, which has been granted a Lloyd’s of London broking licence for the UK operation and is directly authorised and regulated by the Financial Conduct Authority. Once our Portuguese business has broker status, we can access the Lloyd’s Brussels capacity.

How important is cyber insurance and what are the challenges?

Cyber insurance is a strong growth area for Elmore. We’ve seen high-profile cyberattacks in Portugal recently, and it’s an issue across all geographies and sectors. Moreover, with the conflict in Ukraine and the growing risk of largescale attacks, there is no room for complacency: governments, businesses and individuals are all vulnerable.

As the risks mount, insurers are finding it increasingly challenging to provide cover. With so many attacks and new threats, and the sophistication of cybercriminals, it’s difficult to remain one step ahead. At Elmore, we’re cyber specialists who stay abreast of the ever-changing risk landscape. We help businesses to understand the risks, strengthen their defences through best practices and cyber awareness, and find appropriate insurance policies.

How are partnerships shaping your business? What organisations do you work with in Europe?

We firmly believe in collaborating with fintechs and other industry experts and specialists. Partnerships facilitate the exchange of ideas and knowledge and create strong relationships that can promote better insurance products and services. We aim to be highly visible and active in the community, and we’re keen to work with organisations that can learn from our industry and sector expertise and in turn add value to our business. Our current partners include Fintech House, DIFC FinTech Hive, and Fintech Belgium.

Fintech insurance is one of your key strengths. How has this evolved and what are your plans for the future?

The growth of fintech is an important side effect of digitalisation and open banking. Innovation and disruption are everywhere across financial services, and digital challengers are competing with established players and developing new products to better serve customers. But with innovation and new business modes comes risk, so insurers must play an increasingly important role in managing those risks and protecting fintechs as they move from start-up to scale-up and beyond.

Elmore is committed to fintech insurance and has developed market-leading knowledge and expertise. We have watched the fintech marketplace develop, we understand the risks facing new business models, and we know the measures and behaviours that fintechs must adopt to protect their businesses as they grow.

This is why we launched fintechinsurance.com, our dedicated portal to guide and protect fintechs. From risk identification and silent reviews through to risk transfer, incident response and claims handling, we enable fintechs to trade confidently and build their businesses. Fintechinsurance.com is a joint initiative by our London and Lisbon offices, and it draws on an international network of brokers who can coordinate both local and global insurance through a single channel.

What other areas is Elmore Europe looking at?

We’re a multidisciplinary insurance specialist that continually monitors the risk landscape. We provide insurance where it’s most needed, and, like many of the clients that we serve, we’re also an innovator. We’ll develop new lines as appropriate, filling gaps in the market and meeting new demands and emerging risks. For example, digital assets is a growing area of focus, and we’re also looking at media industries. One thing is sure: with climate change, pandemics, geopolitical instability and conflict, the world is becoming more dangerous and there has never been a greater need for risk awareness and all types of risk transfer – not least insurance.

Written by Francisco Monteiro – EU Managing Director of Elmore Lda.

Elmore Insurance Brokers Limited.

Considerations for Crowdfunding Service Providers Applying for Professional Indemnity Insurance

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The digital age has made it easy to raise funds for business ideas through online crowdfunding service providers (CSPs). Four types of CSPs are available to a business, two of which – debt and equity-based funding – fall under regulations t hat require a CSP to have professional indemnity Insurance (PII).

Key underwriting considerations and questions when reviewing a CSP for insurance

1. What due diligence is undertaken by the crowdfunding service provider before allowing companies to raise capital? Are the companies legitimate

Crowdfunding is becoming more and more popular worldwide. Client money is in some cases held by the CSP, increasing its operational risks. Risks include failure of the investment, fraud, and money laundering.

Underwriters must ensure that a CSP undertakes thorough due diligence to mitigate its risks and avoid liability. Due diligence should comprise background checks, site visits, credit checks, cross-checks, account monitoring, and third-party proof on funding projects.

2. Insurers must confirm that companies raising capital through CSPs are not from crypto or cannabis industries.

Cryptocurrency is still excluded by most insurers, although demand for cover is increasing and insurance is becoming available. However, insurers need more clarity to develop policies.

Like crypto businesses, cannabis firms still don’t have many options when it comes to insurance, as major insurers are staying out of the market because cannabis is still illegal in most territories. That said, some insurers do offer cover.

3. What are the responsibilities of a CSP? Does the CSP assume the role of a nominee shareholder on behalf of the investors?

This question is relevant when the CSP is an equity-based crowdfunder.

Equity-based crowdfunding is where funds are invested by a large number of people, each putting in a small amount in return for shares.

Most crowdfunding platforms offer nominee shareholding. This is where the platform is a limited company solely for the purpose of holding shares on the funders’ behalf.

While this makes life much easier for businesses because they can involve their shareholders in decisions, it is highly risky for the CSP and opens it up to complaints/claims, not only from the business raising funds, but also from the individuals/investors. This makes it hard for insurers to consider covering CSPs that assume the role of nominee shareholder on behalf of the investors.

4. Is the CSP involved in the transfer of funds between the investor and the capital-raising company?

Most CSPs facilitate the collection of funds between the investor and the capital raising-company. Even though it is considered as a high risk from the insurer’s point of view, it can be insured as long as the CSP has its own payment initiation service provider (PISP) licence or uses payment services of an authorised PISP.

5. Confirmation that KYC (know your customer) and AML (anti-money laundering) procedures are in place.

Underwriters expect CSPs to be fully compliant with AML regulations and to conduct a reasonable investigation of their onboarding companies to make sure they are legitimate before joining their platforms. CSPs must check fundraisers and follow AML and KYC procedures to prevent suspicious activities on their platforms. These checks enable potential threats to be detected and potential crimes to be prevented.

Available insurance coverage for CSPs
Elmore has developed a ‘package’ insurance policy that comprises a range of different policies for different scenarios that may arise when running the platform. A key area is professional indemnity insurance (PII), which covers the legal costs incurred as a result of claims from third parties for a failure in the provision of the technology platform’s services. Cyber risks, management liability and external and internal theft are also included as part of the overall package — in one policy document.

We recommend buying a package policy to minimise the risk of claims falling through the gaps between policies, particularly for claims relating to privacy and security breaches, which can result from professional negligence covered by a PII policy and can also be covered by a cyber insurance policy. General liability, including public, products and employers’ liability, should also be purchased for damage to goods and bodily injury to the public and the business’s employees.

About Elmore Insurance Brokers
Elmore Insurance Brokers Limited advises its clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers, and it depends on clear and focused engagement. Elmore is committed to helping its clients understand current and evolving risks and promote best practices in risk management.

Written by Francisco Monteiro – EU Managing Director of Elmore Lda.

Elmore Insurance Brokers Limited.

5 risks that sharing economy platforms face

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Sharing services, sharing products, sharing value, sharing risks? Here are the top 5 sharing economy insurable risks to be aware of and how to manage these risks:

1. Professional services and management decisions :
Exposures can arise from execution risk when sharing economy platforms develop innovative methods of offering services, products and investment. If you lack plans for business disruption, you face professional services risks as well as risk from management decisions.

2. Cyber threats and privacy breaches – Because platforms use technology to connect customers with product and service providers, cyber events can pose serious operational and reputational risks for sharing economy businesses. A cyber and technology insurance policy will typically provide a risk transfer solution for both first-party business interruption (BI) risks and third-party liability exposures from security breaches.

3. Business interruption Business interruption is an established class of insurance, with the policy trigger usually being physical or non-physical damage. Sharing economy businesses can experience a variety of business interruptions scenarios such as supply chain failure, fire/flood or other acts of God, as well as reputational damage, all of which could drive users away from the platform.

4. Property damage Damage to owned or third-party property while in transit or leased to a consumer can typically be covered by an insurance policy. However, fraud is an area of concern for underwriters, and the insured must have adequate protocols and procedures in place to mitigate the risk of property fraud.

5. Intellectual Property (IP) IP rights are only useful if you are able to enforce them – and enforcing or defending IP rights against infringement can be costly. You should consider taking out an IP insurance policy to cover the expenses of legal proceedings.

Available coverage
User fraud is a concern for insurers, particularly in relation to leased property. Terms and conditions should determine where liability arises in most cases, but if there is an unresolved dispute, there may be a legal claim against the platform for failing to sufficiently vet the user.

A solution is to ensure the platform has a ‘package’ policy that covers a range of different policies for different scenarios that may arise when running the platform. A key area is professional indemnity (PI) insurance, which covers the legal costs incurred as a result of claims from third parties for a failure in the provision of the technology platform’s services.

We recommend buying a package policy to minimise the risk of claims ‘falling through the gaps’ between policies, particularly for claims relating to privacy and security breaches, which can result from professional negligence covered by a PI insurance policy and can also be covered by a cyber insurance policy. General liability, including public, products and employers’ liability, should also be purchased for damage to goods and bodily injury to the public and the business’s employees.

About Elmore Insurance Brokers
We advise our clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers. This partnership can be significantly enhanced by understanding and implementing risk management best practices.

Written by Tom Abbotts – Cyber, Technology & Financial Technology (FinTech) Team Leader of Elmore Insurance Brokers Limited.

Elmore Insurance Brokers Limited.

Wealthtech: Are you insured?

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Wealthtech is a subset of fintech. It combines a range of advanced digital tools that provide investors and wealth managers with greater financial insights and precision. However, as with all new technologies and business models, there are risks as well as advantages – which is why it’s important to have the right insurance.

What are the key insurable risks for wealthtechs?

1. Regulatory Investigation Costs – examples of compliance issues include:

• Digital advice services that don’t appropriately capture a client’s risk tolerance, resulting in advice to invest in investment or savings products that do not meet suitability requirements
• Failure to obtain sufficient information from the client to allow the advisor to conclude that its ongoing advice was suitable
• Misleading advertising leading to bad decisions
• Non-compliance with different regulatory and reporting standards in different jurisdictions.

2. Financial Crime – – wealthtech is global and criminals can target vulnerabilities to enable money laundering. Insurance can cover any regulatory or legal investigations resulting from criminal activity.
Theft of money/fraud can also occur both internally and externally. Insurance can cover the financial loss suffered as a result.

3. Cyber attack – wealthtech platforms and the reliance on the internet can leave providers exposed to a wide number of cyber threats such as a data breaches, business interruption and extortion from ransomware. Not only can these events cause direct loss to the company (eg, from business interruption) they can also lead to third-party liabilities and regulatory investigations. A cyber insurance policy can protect against legal liability and potential losses.

4. Software failure – programming errors, code vulnerabilities and software bugs in wealthtech platforms could result in a malfunction leading to financial loss for the client; for example, failing to execute an order to buy or sell shares for a number of users. Users could then bring claims for breach of professional duty. An appropriate professional indemnity policy can cover costs associated with defending such claims and any settlement which may be due.

5. Professional errors – most wealthtech firms still need human input, which can lead to losses through human error. Examples include general poor service, bad advice or errors such as transferring money into the wrong account. A professional indemnity policy can cover any resulting compensatory damages and legal costs.

Mapping risks to insurance
We recommend that, at least once year, firms should map key business risks to cover provided in an insurance policy. Circumstances can often change for fast-growing businesses, with new working styles, new product offerings, and new fund-raising and operations in new territories.

How Elmore Insurance Brokers can help
At Elmore, we help our clients to actively monitor and manage risks. We are insurance and risk management partners for wealthtechs and other tech specialists, and we tailor cover to individual challenges and needs. Contact us to find out more about our products and how we can protect your business.

Written by George Pearson, Client Executive of the Elmore Financial Insurance Team, Elmore Insurance Brokers Limited.

Elmore Insurance Brokers Limited.

Insurance and the sharing economy

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New business models are usually viewed as an opportunity for challengers and a threat to incumbents. But they are also an opportunity for any existing business that can adapt to market forces and evolve its products and services. To use the industry jargon, for every ‘disruptor’ there is also an established player who will ‘pivot’ to remain competitive.

With the rise of the sharing economy, which bypasses intermediaries and is built on mutual interest between peers, the insurance industry is caught between opportunity and threat. The most direct threat is from peer-to-peer (P2P) insurance, which like P2P lending is a growing strand in the sharing economy.

According to the research firm Tracxn, brands such as Teambrella and Friendsurance top a list of more than 70 P2P insurance start-ups worldwide. But capacity in P2P insurance is limited and most companies focus on niche personal lines. At heart, they are technology-driven versions of centuries-old mutual insurance companies. The more important development is the force behind today’s underwriting innovations – namely insurtech. Once perceived as challengers, insurtechs are now viewed as partners, helping insurers to harness the benefits of digital technology.

When it comes to non-insurance P2P models, the field is open for those who can develop new business lines to fill product and service gaps. However, underwriting these models can be challenging and requires a firm understanding of market trends and hard-to-place risks.

Let’s take a closer look at the sharing economy, why it has become so popular across many industries and sectors, and what P2P models mean for the future of insurance.

Tech-based growth

Collaboration is the principle behind the sharing economy, with like-minded people coming together to share assets and services. The term ‘sharing economy’ began to appear in the early 2000s when rapid advances in digital technology, particularly the development of the smartphone, made it possible to easily connect people and support new business platforms. Many of these collaborative platforms have become household names, such as Uber and Airbnb, and PwC estimates that the sharing economy will be worth $335 billion globally by 2025.

Understanding and insuring new models

Insurance has a vital role to play in protecting the sharing economy and helping it to grow. However, as with any business trend, it takes time to understand new commercial relationships and liabilities. Brokers and insurers must carefully follow the trend, assimilate and analyse the market data, and work closely to provide cover that is in keeping with their risk appetites.

Insurers need reliable data to quantify P2P risks, and cover can only be provided if there is a clear insurable interest. Because the sharing economy doesn’t conform to traditional insurance models, and insurable interest is difficult to establish when exchanging assets and services, underwriters are in uncharted territory and must develop bespoke solutions.

For insurers with flexibility and the right focus, the sharing economy is an opportunity to diversify and extend product lines. For example, Lloyd’s stepped in to insure Airbnb in 2012 and now has a sharing economy strategy for P2P products. Another example is the ‘rent anything’ platform Fat Llama, which is underwritten by Hiscox. The presence of established and respected insurers in the sharing space inspires confidence and will encourage further growth.

Elmore and innovation

Brokers shape insurance products and help to manage change as marketplaces and businesses evolve. They are traditionally the innovators in the insurance industry, matching supply with demand, and their role is increasingly important in the fast-moving and ever-changing digital world.

The sharing economy is a by-product of digital transformation, which has led to many new enterprises, and at Elmore we design products to bridge insurance gaps and create confidence in the overall digital economy.

Whether you are a P2P start-up, a challenger bank, or an infosec, we can review your insurance requirements and help you find the right cover. Take a look at our services and the industries we support, and find out how we can protect your business and help you succeed.

Elmore Insurance Brokers Limited.

Home thoughts from…home

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The London re/insurance market takes huge pride in developing business through face-to-face interactions. Indeed, it’s what gives the market its distinctive character and power. So, when lockdown was announced, our industry’s USP was almost completely erased.

Insurance brokers are invaluable intermediaries who help a business arrange specialist insurance programmes. As a placing reinsurance broker I help insurance companies all around the world get access to specialist reinsurance products from Lloyd’s and the London reinsurance market. Before the pandemic, I could walk into Lloyd’s with a finely-tuned presentation and rely on the strength of my existing relationships with underwriters, confident that most risks could be discussed in person and a solution found.

It’s no secret that actuaries provide underwriters with a base rate premium against which quotations can be benchmarked. So why the need for brokers? All re/insurance business involves risk, and with risk comes the need for trust and clarity. While underwriting models are strong and well developed, they may fall short in some areas because of the economic climate, financial stability and other variables. Brokers can cut through any issues or grey areas and ensure that the needs of both the underwriters and the clients are met. And here’s the rub: the best way to do this is for brokers to sit directly with the person making the decision and negotiate the details.

What happens now our face-to-face role has gone? Personally, I used to curse the queuing system in Lloyd’s, but now I’m chasing endorsements to be signed over a three-week period when previously they would have been completed in just hours in the Lloyd’s building. In fairness, much of this is due to teething problems following the sudden need to work from home, and we’ve been learning to adjust; however, work is certainly slower outside of the London environment. In this respect the virtual world is not as efficient as the real one.

Oddly, virtual conferencing (which is now the norm) has allowed/encouraged us to engage at a more personal level with our overseas markets. So, while we’re feeling the loss of our Lloyd’s workplace, we’re developing new face-to-face relationships in different parts of the business – which is good for us and good for our clients.

About Elmore Insurance Brokers

Elmore advises its clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers, and this partnership depends on a very close working relationship and careful analysis of risks. Elmore provides this focus and expertise, helping businesses to understand and implement risk management best practice.

Written by Nik Pass, Client Executive of the Elmore Financial Insurances Team, Elmore Insurance Brokers Limited.

5 Insurance considerations for firms operating under PSD2

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Elmore takes a comprehensive approach to risk identification and risk management, for the benefit of insurance offerings that protect and strengthen any business operating under PSD2. We summarise areas where we support PSD firms:

1. PSD2 risk mapping and identification

We identify and map key risks for PSD2 services and technology offerings along with other business areas, and we outline potential loss scenarios so that maximum probable losses can be calculated.
Following these discussions, firms will have a clear idea of the risks facing their businesses and are better able to judge if they should mitigate, accept or transfer these risks.

2. Silent Review – insurance due diligence

A Silent Review of insurance policies, including suitability of PSD2 Professional Indemnity insurance (PII). This is particularly useful after a change in business model, industry-specific or global regulatory action, or for an impending M&A or fund raise.

During the Silent Review, Elmore will:
• Help calculate the specific requirements of the PSD2 Professional Indemnity Insurance (PII)
• Analyse business activities in light of the coverage purchased
• Review all relevant insurance policy terms and conditions
• Assess the adequacy of the sum insured, deductibles and premiums
• Identify gaps or overlaps in coverage between policies
• Provide peer review analysis

A report with key recommendations and a risk rating is submitted at the end of the review. A higher level of detail is provided if enhanced due diligence is required.

3. Risk transfer/insurance

Elmore provides advice on, and places, insurance into Lloyd’s, the world’s leading insurance and reinsurance market, along with a range of competitive company market and MGA insurers. We look for the most competitive pricing and suitable coverage for our clients.
Through our market presence, we secure tailored solutions for firms operating under PSD2, creating long-term partnerships based on a clear understanding of our clients’ evolving needs in relation to PSD2.

4. Partner with insurers – embedded insurance

There are many ways insurance can help firms operating under PSD2:
• Embedded insurance for your customers – insurance can be an innovative way for a firm to protect its customers from a variety of risk events, including but not limited to:
o Personal or micro SME cyber insurance
o Gadget insurance
o Travel insurance
• Service warranty for your customers – insurers can provide protection for a firm offering a service warranty to its customers without the firm needing to issue any insurance policy to customers.

5. PSD2 M&A and Fund Raises

Firms operating in the PSD2 environment are increasingly active in mergers, acquisitions and fund raises. Elmore can support M&A or fund raise insurance due diligence. M&A insurance allows the buy-side to offer more appealing terms, while the sell-side can reduce the escrow period and have a clean exit. In short, M&A insurance is a deal enabler.

About Elmore Insurance Brokers

Elmore advises its clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers, and this partnership depends on a very close working relationship and careful analysis of risks. Elmore provides this focus and expertise, helping businesses to understand and implement risk management best practice.

Written by Simon Gilbert, Founder and Managing Director, Elmore Insurance Brokers Limited.

Managing risk: The challenge for challenger banks

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Think of an athlete attempting to beat a ‘personal best’ or someone scaling a mountain. Both are individual challenges. In the business world, we’re now used to hearing about another type of challenge, or more accurately, ‘challengers’. Namely, disruptive start-ups who are turning traditional business models on their heads and taking on industry incumbents.

Challenges may be exciting, but they come with risks. For an athlete pushing the limits, there’s always a danger of injury. And if your ambition is to conquer Everest, the hazards are even greater. For a challenger bank, the stakes are not quite so high, but every enterprise carries a risk – especially if it’s breaking new ground.

That’s why challenger banks must protect themselves with the right insurance. Regulations and compliance, corporate responsibility, media scrutiny, and cybersecurity are just some of the things to consider and manage.

Top 5 challenger bank insurable risks

Understanding how insurance can support a challenger bank is as important as identifying the risks facing the business.

1. Regulatory investigation costs

Accountability is higher than ever for challenger banks, and regulators the world over continue to raise the bar for disruptors. Challenger bank insurers know it’s essential to provide immediate support in the event of a regulatory investigation so that any issues can be suitably escalated and addressed. Insurers will typically pay the costs of a specialist regulatory legal expert, to help with any responses to regulators, and will advise on how best to handle a regulatory investigation.

2. Liability from financial crime

Financial crime is one of the key risks for a challenger bank. Controls may not be strong enough when the bank’s attention and energy are focused on developing the business. Criminals will be quick to exploit weaknesses for money laundering and other illicit activities. As the business grows and transaction volumes increase, the criminals can identify vulnerabilities in transaction monitoring which could result in significant liabilities for the bank as a whole, as well as for its directors and officers. Professional Indemnity (PI) and Directors and Officers Insurance will cover the legal defence costs in defending financial claims along with damages or settlements that may be awarded.

3. System glitch

Software development is inherently difficult to predict and plan. By nature, software is intangible and often involves a large number of stakeholders. This can create many risks that can lead to downtime and lost revenues. Insurers will cover increased work costs along with any loss of revenues or net profits during the time of the interruption.

4. Data breach

Acting as controller or processor of (sensitive) personal data exposes a business to a variety of risks which need to be carefully managed. The accidental or malicious breach of customer data will require some form of action to meet regulatory obligations. Insurers will cover the event management costs and resulting liability, including PCI and data protection fines, where insurable by law.

5. Theft of customer funds

When customer funds are compromised in a bank’s environment, for example through authorised push payments (APPs) or social engineering fraud, it can lead to investigation costs along with possible financial loss if the compromised funds are deemed to be the bank’s responsibility. Insurers can cover different loss scenarios including loss in the customer environment. Crime losses often involve significant sums and should be insured for balance sheet protection.

Mapping risks to insurance

We recommend that firms should map key risks to available insurance policies at least once every year. Because circumstances often change for fast-growing businesses, you should monitor work arrangements and styles, new product offerings, new fund raising, and operations in new territories.

Quem Somos

At Elmore, we advise our clients to actively manage risks and optimise insurance at all stages of their growth. Insurance is a partnership between a business and an insurer, and when that partnership is based on a clear understanding and assessment of risks, both current and emerging, the business will be fully protected as it matures. If you’re a challenger, keen to develop and grow, managing risk should never be an afterthought.

Written by Simon Gilbert, Founder and Managing Director, Elmore Insurance Brokers Limited.

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