Brand New Product Offers Embezzlement Coverage for Insureds

Capital Shield® Covers Personal Lines Customers 

Author: Richard Kerr | June 28, 2019

It’s the mid-1990s. The industry is buzzing about a new coverage called Employment Practices Liability (EPLI), but no one truly understands what it is. The policy language and claims handling are unfamiliar, but it is clear retail agents should quickly study the coverage and, most importantly, offer it to every insured. Cut to today. EPLI is as common as property insurance and is offered by dozens of insurers. We expect the evolution of Capital Shield® to be similar, albeit more exclusive. The best way to understand this new embezzlement product is to consider a real life example.

A high net worth private client contacts your office in a panic. The unthinkable and unexpected has occurred. They detail that they may have been victimized by an embezzlement scam at the hands of their investment advisor. Your client is devastated that their hard-earned nest egg is gone. Thoughts of the well-known Bernie Madoff Ponzi scheme run through your head, along with the fact that most individuals incorrectly believe they are already covered by some form of insurance should they fall victim to fraud committed by their trusted registered investment advisor or fund manager.

The sad truth is that, even though your clients may think they are protected, they probably are not. Thankfully, your inevitable “sorry, you have no coverage” conversation has now been altered with the availability of Capital Shield®, the first and only embezzlement insurance policy of its kind to be offered in the insurance marketplace. Capital Shield is designed to protect Individuals and Trusts, whom have accumulated wealth through years of hard work, diligent savings, inheritance or from the sale of a successful business. As one acquires wealth, it’s wise to protect those assets through the transfer of risk to an insurance company, similar to purchasing a high limit umbrella policy.

Capital Shield may be purchased in increments of $1,000,000 limits, up to a maximum of $10,000,000. There is no coinsurance clause or need to insure up to a predetermined percentage of invested assets. The insurance application is very simple and easy to complete: all that is required is your desired limit,  the names of the financial advisors, assets/fund managers and other securities professionals with direct access to your assets, along with their corresponding CRD number and firm name. All information will be underwritten by Berkley FinSecure for prior citations, violations and criminal activities, with resource tools provided to applicants to gain a better knowledge of their advisor’s investment history. These key persons must be named on the Capital Shield policy for coverage to apply.

Unfortunately, investment advisor fraud is occurring more often than one would suspect; it’s happening all over the country. In many cases, victims of embezzlement hire and assume the expense of engaging an attorney. Often, after tens of thousands of dollars are paid on legal expenses, the perpetrator has fled with the stolen funds and only nickels on the dollar are available for recovery. The Capital Shield policy greatly reduces or eliminates these out-of-pocket expenses. The policy pays up to policy limits at the time law enforcement has indicted the perpetrator.

A perfect insured for the new Capital Shield® product would be a high net worth individual and or business owner. Most of these clients have generated their money the old-fashioned way; they earned it. They assume the risk of entrepreneurship in running their businesses, therefore, they don't want high risk in their investment portfolio and they certainly don't want someone embezzling their hard-earned dollars. The Capital Shield policy transfers this risk to Berkley FinSecure, a member of the A+XV rated Berkley Companies.

Every retail agent in the country should offer Capital Shield, just as they offer EPLI or traditional crime coverage. It bridges an important gap in each insureds’ individual insurance program. It’s very easy to quote: $1,500 per million for limits up to $10,000,000. Agents should study up on this new product and offer it with every personal lines renewal quote in order to do the best job for their insureds and to protect their own errors & omissions exposure.