MPR offers a financial lines package policy to employee ownership trusts:
The financial risks facing organisations and their management teams are constantly evolving and growing in complexity. Rigour and diligence are important disciplines and do provide a level of protection but good insurance can play a part in protection of the assets of both the employee ownership trust company, the subsidiary companies that sit beneath it and the managers and trustees within the operational framework. The Management Risks Insurance package policy for Employee Ownership Trusts is an integrated solution and provides four important sections of cover, each with its own limit. This policy also contains some features specific to the structure of employee ownership trusts.
Why do your clients need Management Risks Insurance?
- When changes in ownership takes place, management liability policies will automatically enter ‘run off’, so employee ownership trusts will need protection for acts that occur after the date on which the sale of the shares takes place;
- Given the structure of some employee ownership trusts, standard wordings may not be suitably configured or contain the correct terminology to match up with the relevant organisations and individuals;
- The management liability policy for the ownership trust needs to be arranged in a way that reflects the new ownership structure.
What does the policy cover?
A comprehensive package policy providing cover for:
- Trustees, Directors and Officers Insurance;
- Employment Practices Insurance;
- Company Insurance;
- Employee Crime, Crime using Computers and Social Engineering Crime.
What does an underwriter like to see?
- Consistent and experienced management;
- Comprehensive and robust risk management strategies;
- UK based organisations;
- Organisations with strong checks and controls in place.
Is there anything an underwriter wouldn’t insure?
Underwriter risk appetite largely follows the standard approach, so challenges exist on those trades characterised by higher hazard risk profiles and poorer historic experience than the average – financial institutions, Independent Financial Advisers and biotechnology companies are examples of this;
Overseas activity will introduce additional challenges, considerations and questions from an underwriter.
Why choose MPR?
- Deep experience over many years in all the products we underwrite
- Simple and clearly stated policy language with the removal of ambiguity
- A straightforward, broker focussed, technical and service based proposition
- Strong financial rating
- Comprehensive and constantly improving cover
- Management liability policy language has developed and matured significantly in recent years. The result is policy language which is clear and which has evolved to accommodate the changing landscape and exposures faced by companies and their directors. However, many of these are a ‘one size fits all’ and are not calibrated to the specifics of employee ownership trusts and their operational structure.
- An additional insuring clause for independent director reimbursement cover
- The bespoke wording includes an additional insuring clause for independent directors who are part of the go forward operational structure. This can only be used by independent directors.
- An additional limit of liability specifically for defence costs
- An additional limit specifically reserved for defence costs for trustees, directors and officers (defence costs are covered as part of the standard limit, but such limit includes all other loss).
What can go wrong?
Rising regulatory risks remain one of the biggest challenges facing many businesses.
Regulators come in various different forms and sizes, depending on their scope and remit. According to The National Audit Office there are more than 90 regulatory bodies in the UK with total expenditure close to £5 billion a year. Regulator risks are consistently raised as the greatest concern amongst the directors of UK businesses with the number of claims based on regulatory prosecutions having risen sharply in recent years. According to law firm, BLM, SME firms attracted fines of more than £60m in 2021, which is half the value of fines issued over the previous five year period.
Employment practice claims are on the increase and can be time consuming and expensive.
Since the Supreme Court ruled that employment claim fees were unlawful in 2017, caseloads have been in an upward spiral, rising nearly threefold in the 4 years that followed. Whilst the 2022 numbers show a welcome fall in numbers reported, cases remain high. In the quarter to June 2022 there were 19,000 Employment Tribunal receipts, 15,000 disposals, and 487,000 cases still outstanding, suggesting claims are taking longer to reach conclusion.
The potential impact of employee dishonesty can be damaging, and the risk is rising.
The BDO Fraud Survey, which monitored fraud trends at 500 mid-sized UK firms throughout 2021, found that 84% experienced fraud in 2021. 37% of businesses reported an increase on the previous year with 33% of these externally generated. 38% of these involved collusion between internal and external individuals. The average fraud loss reported in 2021 totalled £223,000.