Insurers tighten lens on digital and M&A risks
Insurance companies have sharpened their underwriting methods rather than restricting coverage as regulators increase oversight of financial advisers. Jessica Thayer from Starkweather & Shepley Insurance said carriers examine leadership backgrounds and investment approaches for each firm instead of changing policy terms. The industry has not seen broad enforcement actions since the 2008 financial crisis.
Insurers remain cautious about alternative investments and cryptocurrencies because these assets lack consistent regulation. Some carriers refuse to quote policies for firms handling digital currencies. Pension funds face higher premiums than individual investors because of greater lawsuit risks.
Cyber insurance policies have expanded, but require basic security measures such as multifactor authentication. Ransomware attacks pose the biggest threat to wealth management firms. Hackers study company operations before demanding payment to restore access to systems.
Mergers raise liability questions that companies address through tail coverage lasting 1 to 6 years. Buyers rarely absorb past claims from acquired firms. Reputation concerns arise when clients reject settlement offers despite insurer recommendations to resolve disputes quickly.
