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Insurance industry

Community Banks Face Hidden Exposures Beyond Derivatives

Strategic Insights

— 1 min read

Community banks are facing numerous hidden exposures beyond the recent frenzy of exotic derivatives and mergers and acquisitions. Traditional directors and officers (D&O) liability risks, check kiting, employee fraud or dishonesty, and safe deposit box losses pose significant threats to community banks. Defense costs for D&O lawsuits have reached an all-time high, averaging $967,000 per case, according to a 1994 study by The Wyatt Company. To mitigate these risks, Executive Risk Management Associates has introduced Form24Plus, a comprehensive D&O liability coverage program that offers 13 additional coverages and 14 enhancements to existing coverages.

Key Takeaways:

  • Community banks face numerous hidden exposures beyond derivatives and mergers and acquisitions.
  • Traditional D&O liability risks, check kiting, employee fraud or dishonesty, and safe deposit box losses pose significant threats to community banks.
  • Defense costs for D&O lawsuits have reached an all-time high, averaging $967,000 per case, according to a 1994 study by The Wyatt Company.
  • Executive Risk Management Associates has introduced Form24Plus, a comprehensive D&O liability coverage program for community banks.
  • Form24Plus offers 13 additional coverages and 14 enhancements to existing coverages, including deletion of the $2,500 financial benefit threshold, cash letter coverage, first class mail and courier service coverage, safe deposit box coverage, and check kiting coverage.
  • Deborah Urbano, underwriting manager for community banks at Executive Risk, explains that Form24Plus sets a new standard for Standard Form 24 by combining it with the D&O program to offer a more comprehensive and efficient coverage package to community banks.
  • Executive Risk has simplified coverage for community banks, reducing the possibility of coverage gaps.

Statistics:

  • Average defense cost for D&O lawsuits: $967,000 (rate not specified) [Source: The Wyatt Company (1994)]
  • Number of additional coverages offered by Form24Plus: 13
  • Number of enhancements to existing coverages offered by Form24Plus: 14
  • Financial benefit threshold deleted in Form24Plus: $2,500

Sources:

  • The Wyatt Company (1994) - "Defense Costs for D&O Lawsuits Reach All-Time High"
  • Executive Risk Management Associates - press release (April 17, 1995)

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