From payment processing to alternative investing to expedited lending, the fintech industry has introduced innovation to financial related transactions where banks have otherwise been slow to expand. As a fintech company, the risk landscape that your company operates within is exactly as its name implies, combining the risks encountered by both the tech and financial sectors. This implies regulatory compliance, a high level of cyber security and great potential for financial damages to your clientele if products/services fail. While it proves to be a promising and exciting sector, it is also a very new environment requiring careful diligence, strong compliance, a careful risk management program and a well structured insurance portfolio. Aside from traditional insurance products like general liability and workers comp, fintech insurance programs revolve around 3 core areas: 1) executive liability (D&O insurance), 2) professional liability (E&O), and 3) cyber liability. Due to capital requirements, financing structures, and potential for either failure or large growth, accusations can arise continuously throughout that growth phase, including:
- Mis-representations made in private placement memorandums
- Employment related litigation including failure to hire/promote, discrimination claims, wrongful termination, etc
- Bankruptcy and creditor claims
- Claims from competitors asserting theft of trade secrets
- Claims from customers asserting financial damages
- IPO and/or M&A related litigation
As fintech models differ so do their risk management needs. For companies providing consulting or professional services, the potential for professional liability claims increases, whereas companies offering cloud storage solutions have a greater demand for stronger cyber security and data breach insurance. With some fintech companies providing industry specific solutions, needs can also vary depending on the industry being serviced. For example, fintech companies servicing the financial industry require increased compliance and may encounter greater loss severity such as larger financial damage claims resulting from product failures. Trends such as social engineering attacks and increases in ransomware attacks create an even more complex risk environment. It is important to partner with a broker that understands the range and complexity of the risks you face. As a relationship driven boutique brokerage, we work closely with our clients to better understand their risk requirements so that we can leverage our strengths and structure insurance solutions to best fit those needs.