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Financial institutions represent a broad array of entities that provide financial services, from banks to hedge funds, to mutual funds, insurance companies, investment advisers and other types of financial organizations. Each of these kinds of businesses faces specialized liability risks, and therefore they need specialized solutions to manage those risks.

In the current economy, the pressures of inflation and regulation are amplified by pervasive uncertainty in markets. These are fueling risks for financial institutions across the board. Mitigating and managing risks has become paramount.

Among the insurance products that financial institutions most often think about are directors and officers (D&O) liability, employment practices liability insurance (EPLI), fiduciary liability, and professional liability or errors & omissions (E&O) liability, which are tailored to various types of institutions. These are frequently structured in primary and excess layers, according to the coverage needs of a given institution. 

Institutions have many choices for liability insurance, but the fact is, not all liability insurers are the same. When seeking a particular type of policy and coverage limits, financial institutions and their risk advisers should apply additional criteria to find a strong insurance partner. These include:

• Financial strength. Brokers and risk professionals already know that working with a well-capitalized insurance company is one way to reduce concerns about claims-paying ability. But a stable balance sheet by itself is not enough to forge a long-term relationship that meets the specialized needs of financial institutions. Even very strong insurance companies sometimes choose to abandon classes of business, which can force risk managers and their brokers to scramble for other risk-financing options. 
• Underwriting approach. A good insurance partner will approach underwriting in an open and flexible way, with a goal of achieving stable results over time that underpin commitment to a given class of risk. This kind of approach benefits both the insurer and the policyholder. Inflexibility in underwriting can lead to an adversarial relationship. For example, some insurers adopt a knee-jerk response to all accounts in their portfolio, rather than underwrite each risk in and of itself. A change in a financial institution's risk profile should not automatically come with a change in risk appetite for its insurer.
• Industry expertise. Some insurers offer coverage without a deep bench of expertise in the industries they underwrite. That presents a problem, especially for financial institutions, which benefit from trusted relationships with risk management partners who truly understand their businesses. Risk professionals and their brokers should look for insurers that have experienced and effective teams that know their industry inside and out.
• Service standards. Responsiveness is no longer a nice-to-have item in business. In a dynamic risk environment, financial institutions and their advisers need to have prompt answers to questions about risks, exposures and insurance coverage. Claims are not just balance-sheet stressors. They also can be traumatic events for management teams, boards of directors, and financial services professionals, so claims service must be highly responsive.
• Partnership philosophy. Strong insurance partners, like many successful financial institutions, focus on relationships and not just transactions. A philosophy that emphasizes partnership and long-term success for all parties is a key criterion when choosing a liability insurer.

At Nationwide, our Financial Institutions team has been underwriting risks and serving financial services businesses for more than 15 years. We're creative problem-solvers who are committed to standing by our customers and helping meet their risk management needs with specialized products and responsive service — not just today but for the long term.