coverage for civil monetary penalties

Extra Protection for Bankers

Extra Protection for Bankers

Financial institutions face heavy scrutiny as the economy changes. This often results in FDIC investigations and penalties if something is found to be amiss. Due to this, these institutions’ executives should consider coverage for civil monetary penalties for extra protection.

Extent of the Coverage

Bankers are provided some protection under a director and officer, or D&O, insurance policy, but the limits of this coverage do not include the bankers personally. Insurance companies responded by creating the civil monetary penalties policy that can insure a single executive up to $250,000 for the penalties. This coverage does not include the bank, only the individual officer of the institution.

Importance of the Coverage

The FDIC made it illegal for the D&O policy to cover civil monetary penalties. In turn, this left executives without coverage in that regard. Insurance companies created a way for individuals to be protected, mitigating the personal risks bankers face. If a director or officer is assessed by a regulatory committee and charged with a penalty, they can personally be covered by this policy. The recent financial crisis put financial institutions in the spotlight more than ever. As such, the FDIC increased scrutiny of these institutions and levied new penalties against them. As a banker, coverage for civil monetary penalties is a wise investment and should be considered carefully for your personal protection in liability cases not protected by your company’s D&O policy.

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