Financial Solutions

Crime Insurance

Crime Insurance (Fidelity, Bankers Blanket Bond, Commercial Crime, Computer Crime, etc.) protects the company/the insured from financial loss or a loss for which the insured is legally liable, caused by dishonest, fraudulent or reckless acts committed by any person. The many names of the different crime products are indicative of the wide variety of coverage provided in the insurance market.

The vast majority of claims covered by a Crime Policy are due to employee infidelity. This risk therefore attracts the biggest allocation of premiums. Other types of coverage, for risks caused by individuals other than the insured's employees, constitute a smaller allocation of the premium.

Many non-financial companies purchase coverage for Employee Infidelity, but leave the exposures to third party crime uninsured. While most companies' property insurance provides some extent of coverage for third party crime (i.e. burglary), contemporary crime insurance provides coverage for third party crime such as thefts, forgeries, lost securities, etc.

The Employee Infidelity coverage typically restricts policies to losses caused by employees who have the intent to gain financially and personally from his/her acts. This has often left organisations uncovered from the potentially catastrophic risk of losses caused by employees whose intentions are other than personal and financial. Such actions by employees, branded as "Unauthorised Trading" are actions that are intended to contribute financially to the company, but also provide non-financial gain to the employee.

There are few financial institutions in the world that do not purchase crime insurance of some sort. However, for commercial companies, whilst the crime exposures to any company is very similar regardless of legislation or territory, the culture for purchasing crime insurance varies greatly from country to country.

This seems to be due to cultural concerns among some companies in some countries indicating or giving the impression, internally as well as to a potential insurer or to the police authorities, that an organisation has a problem with dishonest employees. We know of companies that despite losing the equivalent of tens of millions of dollars, with significant impact on their bottom lines, still do not purchase available insurance coverage, for fear of bad publicity.

Who is covered?
The company for any loss sustained by the company or for which loss the company is legally liable, and which loss is caused by a dishonest, fraudulent or reckless act committed by any person.

What is covered?
The insurer indemnifies the insured for losses sustained, plus costs, charges and expenses, as a consequence of a dishonest, fraudulent or reckless act by any person, committed with the intent to cause improper financial gain for such person.

What is excluded?

• Losses discovered prior to the inception date of the policy
• Consequential losses
• Fines and penalties and other uninsurable matters
• Non-payments of loan (financial institutions)
• Acts committed by employees with a known criminal record.
• Losses of intellectual property

When does the coverage apply?
Crime Insurance is written on a discovery basis, which means that the policy covers losses discovered during the policy period or the extension period, regardless of when the loss was caused. The most common ground for denial of a claim by an insurer is when the loss was actually known to the insured prior to the policy inception. The insured's reporting procedures and the adherence to/control of such procedures are imperative to ensuring that the insurance is effective in the event of a loss.

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