The Impact of COVID-19 on Asset Managers

Al Fine
Al Fine
Director of Risk Management

Al Fine, Director of Risk Management for G2 Insurance Services, recently interviewed Andrew Pritchard, Managing Director of AmWINS, to learn more from his perspective about how the pandemic has affected asset managers, family offices and financial institutions.

Al Fine: What has been the direct impact of COVID-19 on Professional Lines underwriting in the Asset Management, Family Office and Financial Institution space?

Andrew Pritchard: Over the past few years Asset Managers have been viewed by Professional Lines and Directors’ & Officers’ insurance underwriters as a challenging class of business.  While there is no single direct cause, most will argue that many of the recent losses stem from closer scrutiny by the Securities and Exchange Commission (SEC), Department of Justice (DOJ), and other regulatory agencies as a result of past scandals like Madoff and Galleon and the recent insider trading allegations made against a number of hedge funds and expert network firms. The regulatory environment is currently in a state of uncertainty. We are witnessing an increasing number of SEC audits and enforcement actions.

When you add COVID-19 into the mix the situation is exacerbated, constraining the cost and structuring of insurance programs. To date, the direct impact of COVID-19 on Professional Lines underwriting in the Asset Management, Family Office and Financial Institution space has contributed to an increase in insurance premiums. These increases are the result of insurance underwriters’ opinion that economic uncertainty is ripe. Business closings, decreases in revenue and COVID-19 impacts on stock markets all contribute to this. In turn, investment performance will be negatively impacted.  Concerns over difficulties in valuation of investment portfolios and diversification, or lack thereof, are also contributing to critical underwriting assessments.

AF: Can you provide some additional insight into COVID-19 related loss trends?

AP: With regard to the Professional Lines underwriting in the Asset Management, Family Office and Financial Institution space, the industry segments being impacted the most have been risks that have sensitive underlying portfolios focused on investment holdings in the private sector, commercial and residential sector and concentrated investment holdings in industries most impacted by COVID-19 (i.e. Hospitality, Travel).  If Employment Practices Liability (EPL) is underwritten as part of the Professional Liability package, there is a concern by underwriters regarding a high likelihood of claims due to alleged discrimination in the furlough and termination processes.

AF: How about new exclusions or form changes?

AP: Coverage forms to date have not been negatively impacted and there are few, if any, wholesale COVID-19 specific exclusions being placed on Professional Liability policies.  However, it is really too soon to tell.  One area that has been affected is the policy deductibles.  Deductibles have been adjusted upward on many risks that underwriters do not feel are adequate. For example, if some risks have a $150,000 deductible, we are seeing those deductibles increase to $250,000 in some cases or higher.

AF: What has been the buyer reaction to the changes?

AP: Reaction from insureds with regard to pricing increases have caused many to be upset and to question if underwriters truly understand their risk. This is particularly true for Asset Managers that have never suffered a claim. However, most consider insurance a necessity due to investor requirements, regulatory oversight, and high cost of claims and defense when an incident or claim occurs. Therefore, we have not seen any clients opt-out of procuring coverage. Some Asset Managers have decreased their limits to offset the cost, however, most are hoping that by next year the market will be more stable.

AF: Can buyers take meaningful mitigation steps to reduce the pain associated with the market reaction to COVID-19?

AP: Brokers should provide an honest market appraisal to their client and begin the renewal process early.  This is the best strategy.

Group conference calls with underwriters in advance of accounts being quoted has had a positive effect on minimizing pricing increases somewhat, particularly if underwriters walk away with a feeling that Insureds are doing all they can from a mitigation and communication perspective to improve their operations.  Most Investment Managers in the hedge fund and private equity sector have created COVID-IMPACT Assessment Letter of communication for their investors in an effort to quell any concerns.

AF: What is your view about the duration of the “hardening” insurance market?

AP: It’s challenging to predict the duration of the hard market as the impact of market volatility, political uncertainty and the economy in general (due to COVID and other macro factors) will take time to assess and measure.  There is significant insurance capital available, but it is unlikely to be deployed until there is a better understanding of the loss development under the COVID scenario. As a result, capacity constraint and high pricing may be around for another year or possibly even longer.


Al Fine is the Director of Risk Management at G2 Insurance Services. G2 is a full-service risk management and insurance brokerage firm. He provides clients with the foundation for making more informed decisions about risk assessment and mitigation and he is actively involved in exposure identification, risk appraisal, risk finance and program design processes. During the past 25 years, Al has worked as a management consultant, risk manager, insurance company global practice leader and broker. 

Andrew Pritchard, EVP & Managing Director at AmWINS Group. AmWINS is the largest wholesale distributor of specialty insurance products. Andrew provides professional and management liability advice to Asset Managers, Family Offices, Private Equity Firms and Hedge Fund Managers. He has worked as an underwriting manager for large insurance companies for more than 30 years.

For more information, please contact your G2 advisor or G2 Insurance Services at 415.426.6600 / connect@G2insurance.com.

Financial Services, Personal Risk Management, Risk Management