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Insurance Buying Guide for Broker-Dealers and Market Infrastructure
Map each entity’s role, customer assets, services, and systems. For a bank’s vendor review, send its service description and relevant contract terms. For a broker-dealer bond request, ask counsel to verify the exact entity’s applicable rule or contract and requested form; review commercial insurance separately.
Which Insurance Should You Consider for Banking and Exchange?
Consider professional errors and omissions (E&O), technology errors and omissions (E&O), crime, fidelity bonds, cyber liability, and directors and officers. Start with the coverages tied to your day-to-day operations, then use the situations and buying questions below to compare your options.
Professional Liability (E&O) Insurance for Banking and Exchange
The firm provides brokerage, clearing, exchange, advisory, operational, or other professional services to customers.
Ask which services and capacities appear in the insuring agreement and how financial-services, securities, contractual, and customer-asset exclusions apply to the specific allegation.1
Which brokerage, clearing, carrying, exchange, or advisory services are named? How do financial-services, securities, customer-property, and contractual exclusions apply to a trade error or customer loss?Tech E&O Insurance for Banking and Exchange
You provide order handling, exchange connectivity, trading software, data feeds, or operational technology to another firm.
Treat platform failure, delayed processing, data error, and customer financial loss as separate quote examples. Ask for the specific technology-service definition and exclusions in the proposed form.3
Which order-routing, exchange-connectivity, trading-software, and market-data services are named? What terms address delayed or failed processing and resulting customer financial loss?Crime Insurance for Banking and Exchange
Employees or systems can access customer property, change instructions, or move money or securities.
Crime is a distinct category; a general employee-theft example does not answer how customer property, account instructions, or a particular transfer is treated.6
Whose property is insured, and which people, instructions, transfer methods, discovery terms, direct-loss conditions, and exclusions apply?Fidelity Bonds for Banking and Exchange
An applicable SRO rule, regulator, clearing relationship, or signed counterparty agreement raises a fidelity-bond question.
The SEC’s 2013 summary discusses certain broker-dealer bond deductibles under self-regulatory organization (SRO) rules. Verify the current rule for the exact firm and ask what bond form, covered persons, and limits apply.2
Which exact rule or contract clause applies, and what form, entity, covered persons, activity, limit, and exclusions does it specify?Cyber Insurance for Banking and Exchange
The firm holds customer or market information, operates a trading system, or relies on a material technology provider.
NAIC describes cyber policies as highly customized and says most commercial property and general-liability policies do not cover cyber risks. Ask how the actual proposal addresses your systems, vendors, incident costs, and interruption scenario.5
Does the quote address trading and market systems, provider outages, customer-data incidents, and restoration or interruption costs? Which sublimits, waiting periods, and exclusions apply?D&O Insurance for Banking and Exchange
Governance changes, outside directors, investors, or management decisions prompt a liability review.
A board, investor, or counterparty request is a prompt to compare insured entities and people, claim definitions, defense costs, and regulatory or financial-services exclusions.1
Which entities and people are insured, what claims and defense costs are addressed, and which financial-services or regulatory exclusions apply?
Prepare for the Bank’s Vendor Review
Give the bank a short description of your service and the relevant contract terms for its vendor review. Ask which obligations it expects in the agreement, then give those terms to the broker and ask how the proposed policy treats them.3
Verify the Source of a Bond Request
Ask the requester for the exact rule or contract, entity, activity, covered people, bond form, and limit. Apply the request only to the scope named.2
Keep a bond question separate from a crime-policy comparison. Ask whether each proposal addresses the loss mechanism and property described in your operations, and request the applicable forms.6
Describe Each Service and System
Which Providers Should You Compare for Banking and Exchange?
Professional Liability (E&O) Insurance Providers
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Tech E&O Insurance Providers for Banking and Exchange
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Crime Insurance Providers for Banking and Exchange
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Fidelity Bonds Providers for Banking and Exchange
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Cyber Insurance Providers for Banking and Exchange
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D&O Insurance Providers for Banking and Exchange
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Common Questions About Insurance for Banking and Exchange
Do all broker-dealers need the same fidelity bond?
No. The SEC’s 2013 summary describes certain broker-dealer bond deductibles under SRO net-capital rules; it does not establish a current requirement for every firm.2
Read the Full AnswerDo customer-protection rules replace commercial insurance?
No. For broker-dealers, SEC financial-responsibility rules address safeguards for customer assets. Ask separately which commercial policy wording addresses the firm’s own claims.1
Read the Full AnswerSources and Further Reading for Banking and Exchange
Get Help With Insurance Buying and Renewals.
Get help buying coverage and managing renewals, with less paperwork for your team. Create your account and submit an insurance request online.