Is this the ideal insurance solution for fund managers?

Is this the ideal insurance solution for fund managers? | Insurance Business Australia

Professionals Risks

Is this the ideal insurance solution for fund managers?

One company believes it has come up with a unique offering

Professionals Risks

By
Daniel Wood

Frontier Global Underwriting (Frontier), a privately owned, independent insurance firm with operations in the United Kingdom and Australia, recently launched a novel offering targeting fund managers in Australia.

Frontier, a specialist in financial lines coverages, described the offering in a media release as an “Australian-first employment practices liability solution.” The release said by shifting the coverage focus from after-the-event compensation to before-the-event protection it’s “a major departure from traditional insurance policies.”

“There are two aspects to the service offering,” said Simon Spencer (pictured above), the firm’s ANZ financial Lines and cyber underwriting manager. The first, he said, is a human resources (HR) consulting service, offered through an HR department, a firm specialising in employment law advice and HR.

“On top of that we offer cover via an employment practices liability insurance policy, which is underwritten by Lloyd’s of London,” said Sydney-based Spencer.

The aim: fill a fund manager protection gap

The release said boutique fund managers can find that their smaller size and limited resources make it more difficult for them to comply with “complex employment laws and regulations”. Spencer said the offering aims to fill this protection gap.

“I think this is quite unique,” he said. “Some of the large corporates, if there was a claim, might offer HR advice via a law firm but this proactively manages a fund manager’s HR legislation needs and Fair Work Act requirements, so before the event or before the claim.”

He said one advantage for a fund manager is “great advice” from an experienced HR consultant without the cost of actively employing an HR manager, or an internal department.

However, many fund managers running smaller firms, he said, may not be getting any advice regarding compliance with employment laws.

“This is something that the fund managers may not necessarily be thinking about at the moment but if they are, they’re managing it internally as managers of investments, not as experts of employment law, or, worst case scenario, they’re getting advice from a law firm, which can be quite costly,” said Spencer.

The advice aspect of the coverage, he said, would include a consultant visiting the fund manager to provide advice around managing staff – the sort of function that would be performed by a larger corporate firm’s in-house HR department.

“So [advice around] compliance with legislation, protocols, procedures, guidelines in terms of managing staff – and that could be anything from Fair Work requirements, to managing promotions, demotions, performance management and anything around HR requirements,” said Spencer.

The insurance coverage, he said, is similar to a traditional financial lines professional liability (PI) directors and officers (D&O) cover because it is triggered on the basis of an allegation or the filing of a claim. This allegation or claim, he said, could relate to workplace harassment including sexual harassment or unfair dismissal, or “anything along those lines.”

“The policy trigger is on the basis that it provides the insured, the fund manager, with defence costs to defend that claim,” said Spencer. “If the claim is filed and damages are awarded against the defendant, the fund manager, it also triggers damages or compensation.”

Bullying and harassment complaints are going up

The release said that since the definition of bullying was adopted by the Fair Work Commission (FWC) in 2014, the number of applications by employees to stop bullying at work has more than doubled.

“In 2021, following the global Me Too movement, the FWC included sexual harassment in its definition of bullying, putting employers of all sizes on notice for an increase in claims applications,” said the release.

“The regulatory environment and the legal environment is still quite potent – there’s a lot of claims out there,” said Spencer. “So there is a fair degree of exposure in terms of a fund manager not managing the aspirations or the requirements of how you manage an employee and what you’re meant to be doing in terms of complying with the law.”

He said fund managers don’t necessarily consider these risks as part of their management obligations.

Are you a broker working with fund managers or small financial services firms? How are you helping them risk manage their employment practices liabilities? Please tell us below

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