Having the right insurance policies in place might not necessarily be top of the to-do list when setting up a hedge fund. This article is part of a 4-part series detailing some of the key risk areas and insurance solutions when setting up a hedge fund.
This article details the importance of general insurance, a category of insurance designed to protect a hedge fund from a wide range of risk factors.
There are four key elements to general insurance risks that a hedge fund should consider:
- Statutory insurance e.g. employers liability, which covers injuries to employees at work and required by UK law
- Physical assets of the business – IT equipment, tenants improvements and general contents
- Business continuity
Patrick Duggan, Executive Director of Willis FINEX Global, says that Willis would look to tailor the individual needs for each hedge fund by working in conjunction with the employee benefits team “to ensure we’re not duplicating cover”. He says that the above key covers can be incorporated either into an “office package” policy or a “group personal accident and travel” policy.
“Typically, my team would look at group personal accident and travel cover. We would potentially remove the death benefit because the manager will already have a separate life insurance policy in place with the employee benefits team.
“The office package policy is fairly straightforward. It protects the physical assets of the business and extends to include your statutory insurance within the UK in relation to injuries to employees. It would cover physical assets, material damage, money, employers liability, public liability and business continuity; this would give the manager funds to replicate their office elsewhere in the event of something happening to their premises such as a fire or flood,” explains Duggan.
Relationship with Employee Benefits
There is a bridge between employee benefits insurance and general insurance depending on what the manager decides upon. This is where appointing an advisor to handle both insurance packages has its benefits.
“It helps us keep the costs down for clients. If they’ve got employers liability as statutory insurance under their general insurance policy they could offset some of the claims costs of their employee benefit insurances. We take a holistic approach to risk management encouraging open communication between our general insurance and employee benefit insurance specialists to better manage people risk. It’s a bridge that we try to capitalize on at Willis,” says Bracken.
The key message here, for any new hedge fund manager, is that there’s a lot to think about when it comes to getting the right insurance in place.
Swadling says that managers should give themselves enough time to get everything in place.
“Don’t leave it until the week before the business starts trading. Some managers rush things through, but what that doesn’t allow for is an optimal solution.”
Patrick Duggan is Executive Director of Willis FINEX Global, where he manages the general insurance programme for a number of UK financial sector and professional services clients. He has 25 years’ experience in insurance broking, having started with Willis in a regional office and returning to the company in 2001.