Financial institutions have a unique set of insurance coverages designed to address several of the specialized aspects of their business operations. For example, coverages such as mortgage impairment used to protect a bank’s collateral interest in real property, all risk physical loss or damage to cash and securities that is used to protect against loss while these assets are in transit or at rest, and safe deposit box liability to protect against customer claims of negligence while their property is stored in a bank vault.
Financial institutions are often scrutinized by regulators, both federal and state, about what safeguards are in place to protect much of the sensitive customer information contained within their networks. These regulatory inquiries are focused on the banks’ internal data protection protocols and procedures and extend to questioning whether a financial institution purchases privacy and/or cyber liability coverage as part of their financial institutions insurance portfolio.
Lending institutions face many significant challenges
For financial institutions, reputational damage due to a number of incidents, including management practices and data security breaches, should be a serious concern. Fortunately, there are solutions readily available that offer financial institutions and those in a leadership position with reputational damage coverage, something that is of critical importance.
Insurance and risk management solutions for financial institutions have been evolving significantly in recent years, just in time to deal with many of the new and emerging risks, along with changing market complexities and tightening state and federal regulations.
The rise in cyber crimes has led to the creation of a more robust cyber insurance market to address the issue of hacks and breaches, both internally and external. Cyber exposures are further exacerbated by the fact that more and more, banking transactions are either taking place on a personal device or a desktop computer used for online banking. In addition, corporate network breaches, rare occurrences even as recently as a decade ago, are happening with regularity.
The best way for financial institutions to protect themselves against claims is to take a robust approach to compliance and risk management, stay abreast of the complex and changing issues and ensure that the organization has proper financial institutions insurance in place to cover any missteps or intrusions.