Peace of mind for business leaders

Rough Notes, Apr 2001 by Boone, Elisabeth

Royal & SunAlliance's Management Assurance(R) Portfolio protects directors, officers, employees

In today's revved-up business environment, where everything moves at warp speed and technology often trumps common sense, it's hard to find an organization that hasn't been hit by lawsuits, crime, or employee dishonesty. In larger, more visible entities, top executives are sometimes the targets of kidnappers who seek big-bucks ransom payments.

Just thinking about these loss exposures induces fear and anxiety on the part of business leaders, and it puts a high premium on that increasingly elusive commodity known as peace of mind. In an effort to provide a comprehensive response to these concerns, the Professional & Financial Risks (ProFin) division of Royal & SunAlliance created a collection of coverages called the Management Assurance Portfolio. First we'll examine the portfolio to see what it offers to business owners, executives, board members, and employees. Then two ProFin executives will explain how ProFin is structured and how it operates around the world and in the United States.

Inside the portfolio

Management Assurance is a collection of coverages that can be used individually, in any combination, or as a full portfolio to help protect the insured's financial stability. Available worldwide, Management Assurance addresses such exposures as lawsuits against directors and officers, sexual harassment allegations, wrongful termination and discrimination claims, ERISA violations, employee theft and dishonesty losses, ransom demands, and extortion issues. Limits up to

$25 million are available. The portfolio is supported by technology with downloadable applications, specimen policy forms, and coverage information via the Internet. A dedicated claims staff focuses exclusively on ProFin products.

The Management Assurance Portfolio, which was developed in cooperation with brokers and producers, targets mid-market and larger accounts. The insured may be a global business, a smaller privately held firm, a partnership, or a nonprofit organization. Components of the Management Assurance Portfolio are:

* Directors and officers liability

* Employment practices liability

* Fiduciary liability

* Crime protection

* Kidnap/ransom and extortion coverage

* Miscellaneous errors and omissions

General portfolio features include the option to purchase insurer duty to defend coverage; flexible and bilateral discovery periods and automatic runoff coverage with predetermined maximum costs for claims-made coverage parts; single or multi-year policy periods; and the option to combine coverages or aggregates. The policy is noncancellable once the premium is paid.

Policy features

Each of the individual policies in the Management Assurance Portfolio has specific features. Under the directors and officers liability coverage part, the insured's retention applies only to defense costs and is waived for all claims if the insured is not legally liable to pay any amount other than defense costs. Employment practices liability insurance is included for directors and officers; and there is no presumptive identification provision. In addition, a private company can have its D&O coverage endorsed to guarantee a quote for initial public offerings. Coverage is provided for punitive damages for securities claims where insurable.

Last year ProFin introduced Private Stock(SM), a directors and officers liability program for privately held companies that provides loss prevention management consulting services in conjunction with a D&O policy. The consulting services focus on three key areas: strategic business planning, merger and acquisition planning, and internal ownership transition planning.

Key features of the employment practices liability part include: coverage for punitive damages where insurable by law; no exclusion for reductions in force or mass layoffs; and no purposeful or intentional acts exclusion. Class-action-only coverage can be purchased, and varying amounts are available for class action claims or non-class action claims.

The policies are written through Royal & SunAlliance's branch offices nationwide. Local underwriting teams are supported by regional practice leaders, the Financial Products Customer Center, and Royal's Corporate Support Office.

ProFin in action

What is now known as ProFin represents an evolution from what historically were virtually independent professional and financial business units around the globe, explains Joel Campanella, vice president and worldwide professional & financial risks practice leader. "We're in the process of leading a major effort to change our professional and financial business from a collection of independent line of business functions operating sporadically around the world into one world-class business."

The largest operation, based in London, began writing business in the mid-1980s; the U.S. facility was established in 1996 and issued its first policy in 1997. ProFin business also is written in Canada, Ireland, Denmark, and Australia. "We just launched in Italy, Belgium, Australia, and the rest of the UK; we entered New Zealand in 1999; and this year we plan to open for business in Hong Kong, Singapore, Korea, and Japan, as well as the other major markets of Continental Europe," Campanella says. "We're launching ProFin in some countries and relaunching in others." Worldwide premium for ProFin is expected to exceed $300 million and $350 million by year end 2001.