Willis Responds to Landmark Ruling on Fund Directors’ Liability
London, UK, October 17, 2011 - The ongoing financial crisis has claimed many victims over the past
few years, but while banks and their depositors have been largely protected by taxpayer bail outs,
the investment fund community, and the hedge fund industry in particular, has had to fend for
itself to the tune of billions of dollars in investment losses. In response, Willis Group Holdings
(NYSE: WSH), the global insurance broker, has designed a bespoke insurance solution specifically to protect the
liability of fund directors, including in the event of a collapse which exposes them to significant
The Fund Protect solution comes on the heels of a landmark judgement by the Grand Court of
the Cayman Islands, which found two independent directors of a failed fund guilty of “wilful neglect”
and facing USD$111 million in damages. The case against the directors of Weavering Macro Fixed Income
Fund Ltd, which collapsed in 2009 and had been listed on the Irish Stock Exchange, highlighted
directors’ exposures to liabilities, according to Willis.
Ever since the start of the financial crisis, corporate governance has risen up boardroom and regulatory agendas,
precipitating tighter controls across the banking and investment industry. Many institutions and firms now spend a
great deal of time identifying potential exposures and implementing a controls framework, including training, monitoring and
oversight, to minimise the risk of events that could give rise to liability.
Insurance is an important backstop in this regard should controls fail and a legal liability arise. However,
as the Weavering verdict demonstrated, such controls do not always work and, in the event of
a crisis, a firm’s existing insurance coverage may fall short of protecting the personal liability of
a fund’s directors. This is why stand-alone protection for directors is critical and where Fund Protect
The Fund Protect policy is structured to offer the following:
- An additional Non-Executive Director limit above existing liability policy terms.
- Emergency costs of up to 20 percent of
the limit of liability.
- High limits of additional public relations cover.
- Simplified language with several common exclusions removed
and a “Difference in Conditions Clause” to ensure there are no gaps within the current coverage.
for the director arising out of the acts of any service company appointed by the fund.
Directors’ lifetime run-off cover.
- A simple application process that means Willis can provide coverage in less than
24 hours, if required.
- No conflict between the insurance requirements of the investment manager and protection of
the fund directors, particularly the Non-Executive Director’s.
- Premium savings of up to 60 per cent compared to
The Fund Protect solution is also an important development against the backdrop of the European Commission’s proposed
Alternative Investment Fund Manager Directive (AIFMD). The regulation aims to police the activities of hedge funds,
private equity funds, commodity funds, real estate funds and infrastructure funds, among others, which combined account
for €2 trillion in assets under management within the EU.
AIFMD marks the first attempt in any jurisdiction to directly regulate and supervise the alternative fund industry.
The EC proposal, which is now being considered by the European Parliament and Council, has triggered
an industry-wide examination of hedge fund practices and a call for greater disclosure of fund directors’
qualifications and duties.
Paul Richards, Executive Director, FINEX National, the financial and professional risk services arm of Willis, said: “The
ongoing crisis bedevilling the financial services sector, combined with new stricter regulatory regimes, highlights the important
role of insurance as a safety net for when operational and governance controls fail. The Weavering
case has caused independent directors to reflect on their functions at board level and what is
required to fulfil them. It is a reminder that personal liabilities may be incurred and Fund
Protect responds to this by offering a broad coverage that is simple to arrange while providing
directors with control over their insurance protection, in many cases at a reduced cost.”
FINEX specialises in providing specialist advice and risk solutions to the executive, financial and professional services sectors
across the UK, Continental Europe, Asia and Latin America.
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers
professional insurance, reinsurance, and risk management, financial and human resource consulting and actuarial services to corporations,
public entities and institutions around the world. Willis has more than 400 offices in nearly 120
countries, with a global team of approximately 17,000 employees serving clients in virtually every part of
the world. Additional information on Willis may be found at www.willis.com.
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