Financial services Commercial Risk, Bluestone Advisors

Financial services

Banks

Banks

Regional and community banks face and unprecedented array of challenges and insurance offered to them has changed drastically over the past five years. The insurance industry is recovering from the claims associated with the bank failures over the past five years. The collateral damage and result for healthy banks today are higher premiums coupled with precision–guided exclusions on renewals. The barometer of a good renewal in today’s market should not be the reduction in premium, but rather the enhancement in coverage terms and conditions. A $5M policy is worthless if there are 20 exclusions preventing a trigger in coverage.

We often identify 20–30 coverage enhancements available to our banking prospective clients after our initial policy review. Going a step further, BlueStone Advisors works with the top law firms for regional and community banks to certify coverage and assist with defending claims.

D&O, E&O and FI Bonds are highly specialized lines of insurance coverage that require years of specialization. Our advisors are dedicated to the banking industry and continually monitor marketplace trends.

Key Risks to Protect Against

  • Bankers Professional Liability, including Lenders Liability
  • Financial Institution Bond
  • Directors and Officers
  • Network Security/Privacy Breach
  • Employment Practices Liability
  • Fiduciary Liability

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Mutual funds

Mutual funds

BlueStone Advisors understands the financial services landscape and provides cutting edge resources to identify and execute risk management strategies and employee benefit solutions focused on protecting corporate and personal assets while generating higher economic returns.

Directors & Officers and Errors & Omissions coverage are critical policies for Mutual Funds. These policies are unlike any other insurance product; the terms vary from insurer to insurer, and no two policies are alike. Some policies are broad, providing coverage for most activities associated with Mutual Funds. Other policies have exclusions hidden throughout the policy language, thereby excluding critical activities that are common for investment advisors. BlueStone Advisors works with clients to manuscript policy language that fits their firm’s specific investment activities and risk profile.

Key Risks to Protect Against

  • Prospectus liability lawsuits
  • Formal Regulator Investigations
  • Allegations of failure to disclose risks or conflicts of interest
  • Lawsuits for failure to perform due diligence
  • Alleged performance misrepresentations

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CTA/CPO/FCM/IB

CTA, CPO, FCM, IB

The futures industry faces and unprecedented array of potential professional and management liability exposures, any of which can result in a lawsuit, regulatory proceeding or a written demand by a dissatisfied client. Even if a firm or fund does nothing wrong, defense and settlement costs can escalate to millions of dollars and result in additional damage to a firm’s reputation and bottom line.

BlueStone Advisors designed the product specifically for the futures industry to cover the activities associated with Commodity Trading Advisors (CTAs), Commodity Pool Operators (CPOs), Futures Commission Merchants (FCMs), and Introducing Brokers (IBs). Most policies, if not customized, will exclude critical activities that can otherwise are insurable.

Key Risks to Protect Against

  • Allegations by clients for errors in professional services rendered for a fee
  • Cost of corrections
  • Allegations by clients for breaches of investment guidelines
  • Prospectus liability lawsuits
  • Formal Regulator Investigations into alleged trading violations
  • Allegations of failure to discloses risks or conflicts of interest
  • Fee-based lawsuits
  • Lawsuits for failure to perform due diligence in the selection or oversight of sub-advisers or for outside funds
  • Alleged performance misrepresentations
  • Alleged improper valuation of fund assets
  • Allegations by pension fund clients of ERISA violations

Claim Scenarios

Failure to Follow Investment Guidelines

An investment adviser had discretionary authority over approximately $75 million of the client’s assets. The employee in charge of the account believed that the client intended that the account be used as a hedging fund for the rest of the client’s investments and therefore took a substantial short position in U.S. Treasury securities. As interest rates rose, the account value declined by two-thirds in one month. The client sued the adviser and its directors and officers, claiming that he had directed the adviser to invest the account conservatively and had been led to believe that the funds were invested in Treasury bonds, thereby reducing the risk of loss.

Suitability of Investments

A claimant alleged that her adviser failed to effectuate any contributions to her retirement plans over a four-year period and that she did not obtain the employer match that was available for these periods. The claimant also alleged that the mutual funds in her account were not actively managed and that several investments selected by the adviser were illiquid and inappropriate given the claimant’s time horizon and risk tolerance. She sought unspecified monetary damages.

Negligence

A claimant alleged that several unauthorized trades were processed from his accounts through the adviser totaling over $250,000. The claimant sought to have his accounts reinstated as if the unauthorized transactions did not occur. Additionally, the claimant sought the increase that his stocks would have earned during the rise in the market during that period.

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Private equity

Private equity

Private equity investors face liability associated with the fund in addition to management of their portfolio companies. BlueStone Advisors designs products to protect the the firm from allegations against the fund in addition to any underlying portfolio claims.

BlueStone Advisors will conduct confidential pre-acquisition due diligence on portfolio companies and provide a comprehensive risk report and analysis. We will also provide our Private Equity clients with oversight of the underlying insurance programs of their portfolio companies. Often times, portfolio companies insurance coverage and limits are inconsistent; we will structure and monitor the insurance to maintain proper coverage at competitive pricing.

Unique Products for Private Equity

  • General Partnership Liability
  • Loss Portfolio Transfers
  • Captives
  • Key Man
  • Risk Purchasing Group for Portfolio Companies
  • Portfolio Company Insurance Management

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Hedge funds

Hedge funds

The hedge fund industry faces an unprecedented array of potential professional and management liability exposures—any of which can result in a lawsuit, a regulatory proceeding, or a written demand by a dissatisfied investor. Even if a firm or fund does nothing wrong, defense and settlement costs can escalate to millions of dollars and result in additional damage to a firm’s reputation and bottom line.

BlueStone Advisors designs products specifically to protect our hedge fund clients to cover the activities inherent to managing a fund. If not customized, most policies will exclude critical activities that are otherwise insurable.

Key Risks to Protect Against

  • Allegations of misleading statement(s) in the private placement memorandum
  • Allegations by clients for breaches of investment guidelines
  • Allegations of dishonesty or fraud
  • Breach of fiduciary duty
  • Formal Regulator Investigations into alleged trading violations
  • Allegations of failure to disclose risks or conflicts of interest
  • Lawsuits for failure to perform due diligence in the selection or oversight of sub-advisors or for outside funds
  • Alleged performance misrepresentations
  • Alleged improper valuation of fund assets

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RIAs and broker-dealers

RIAs and Broker Dealers

BlueStone Advisors understands the financial services landscape and provides cutting edge resources to identify and execute risk management strategies and employee benefit solutions. Our products are focused on protecting corporate and personal assets while generating higher economic returns.

A critical policy for RIAs and Broker-Dealers is Errors and Omissions coverage. These policies are unlike any other insurance product; the terms vary from insurer to insurer, and no two policies are alike. Some policies are broad—providing coverage for most activities associated with RIAs and Broker-Dealers. Other policies have exclusions hidden throughout the policy language, thereby excluding critical activities that are common for investment advisors. BlueStone Advisors works with clients to manuscript policy language that fits their firm’s specific investment activities and risk profile.

Claim Scenarios

Failure to Follow Investment Guidelines

An investment adviser had discretionary authority over approximately $75 million of the client’s assets. The employee in charge of the account believed that the client intended that the account be used as a hedging fund for the rest of the client’s investments and therefore took a substantial short position in U.S. Treasury securities. As interest rates rose, the account value declined by two-thirds in one month. The client sued the adviser and its directors and officers, claiming that he had directed the adviser to invest the account conservatively and had been led to believe that the funds were invested in Treasury bonds, thereby reducing the risk of loss.

Suitability of Investments

A claimant alleged that her adviser failed to effectuate any contributions to her retirement plans over a four-year period and that she did not obtain the employer match that was available for these periods. The claimant also alleged that the mutual funds in her account were not actively managed and that several investments selected by the adviser were illiquid and inappropriate given the claimant’s time horizon and risk tolerance. She sought unspecified monetary damages.

Negligence

A claimant alleged that several unauthorized trades were processed from his accounts through the adviser totaling over $250,000. The claimant sought to have his accounts reinstated as if the unauthorized transactions did not occur. Additionally, the claimant sought the increase that his stocks would have earned during the rise in the market during that period.

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