Risk Management Practices for Banking Sector
Operations carried out by a Bank: • Core Banking Operations • Credit Cards & Retail loans • Trading in financial products • Sales of first / third party products • Advisory services • Asset Management • Asset Reconstruction
The mediums through which businesses are Transacted are: • Branch Banking • Online Portals • Phone Banking • Social Media
Where can the losses come from? • Internal Fraud • External Fraud • Business Practices & Execution / Delivery • Business disruption & system failures • Damage to Physical Assets & Employment practices
Constituents who can take a claim: • Customers • Regulators • Employees • Contracted Parties (Vendors, Service Providers, etc.)
Broadly Speaking ........ • Losses • Liabilities
Insurable losses and Liabilities are the next few slides
Risk Transfer products available Bankers Blanket Bond
Plastic Card Insurance
PI Insurance ( IB Advisory , AMC , ARC, PE)
Asset Insurance
Currency Chest Cover
Cash in transit Protection
Commercial Crime Insurance
Cyber Insurance
Management Liability Policies (Group level) D&O, EPLI Transaction based insurance
Employee oriented insurance Policies ( Group Health , Travel , GPA) Affinity based Insurance
Coverage Under Bankers Blanket Bond • First party loss insurance • Losses arising due to employee fidelity acts on banking / security-based transactions • Loss within Premises due to theft, larceny, burglary, etc. • Customisations are permitted to take care of transit, counterfeit, forgery and fraud / dishonesty originated by third parties.
Why Cyber Insurance? • Stems from the limitations of the current set of policies to provide protection for cyber losses, whether pertaining to money, securities and Data • The threat of cyber related risks is something that underwriters prefer to weigh and underwrite independent of other policies • The threat of security encryptions being hacked and the need to address the consequential liabilities • The Network down time resulting from a cyber invasion and the need to protect the resulting business interruption losses
Key Insurance coverages in a Cyber Insurance Policy • Failure to prevent unauthorised access to identity information / Failure to provide access to a authorised user • Failure to prevent the transmission of a computer virus through a comp system into a network • Security breach remediation costs & Notification expenses • Computer program and data restoration expenses • Business Interruption losses and related expenses
Professional Indemnity Policy • It is a policy to take care of Professional negligence and the resulting claims. • It is an open peril policy designed to protect the organisation against liability claims from third parties. • An ideal policy to have for advisory services and asset management services rendered for a fee.
Directors’ & Officers’ Liability Insurance Policy • Directors and officers (D&O) liability insurance protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued, for actual or alleged wrongful acts in managing a company
Who Can Bring an Action?
Shareholders
Regulators
Customers
Competitors
Employees
• Inadequate or inaccurate disclosures • Financial Performance and Bankruptcy • Financial Reporting • Gross Mismanagement • Conflict of Interest • Dishonesty or Fraud • Investment or Loan Decision
• Dishonesty and Fraud • Securities Violation
• Lender Liability • Deceptive Trade Practices • Product or Service-related claims
• Antitrust • Copyright and Patent Infringement • Business Interference • Product and company defamation • Deceptive Trade Practices
• Breach of Employment Contract • Employment Practices Liability discrimination, sexual harassment, unfair dismissal, invasion of privacy, failure to provide a proper or safe working environment.
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Management Liability Limits Purchased by other Banks (D&O) NAME
LIMITS IN USD
ICICI Bank HDFC Bank Axis Bank IDBI Bank Yes Bank IndusInd Bank
150 Mn 100 Mn 25 Mn 5 Mn 2 Mn 2 Mn
Cash in Transit Policy • What is Cash in Transit? Cash in Transit, Money in Transit, Insurance from Goldstar means cash, bank notes, brand drafts, currency notes, cheques, current postage stamps, postal orders, money orders, revenue stamps and air-time cards are all included. It protects the insured against risks associated with transporting cash from one location to another. Cash in Transit is specifically designed to protect the insured from: - Loss of money arising out any cause - Loss of or damage to safe/strong room - Any case in which money is being carried - The goods or property of the insured or for which the insured is legally responsible caused by theft or attempted theft.
Coverages under Cash Policy
Currency Chest Currency chest is the place where the RBI kept all the excess money of banks under custody. Whenever, RBI prints new currency notes, first it delivers to currency chests and then currency chests deliver these new currency notes to banks. currency chest is a depositary of RBI. It’s not possible for RBI to reach everywhere so its authorized PSU banks to operate currency chests on its behalf. The bank, however, must maintain a separate account independently of the chest which is monitored by RBI. As of March 2016, there were 4102 currency chests and 3783 Small coin depots. Functions of Currency Chest: • • • • • •
The foremost function of the RBI is to deliver currency notes across the country. It has to distribute new currency notes and recycle old notes, keep cash reserves of banks. Currency chest act as networks of currency distribution. The other function of currency chest is to facilitate note supply. It helps to undertake a smooth supply of currency notes across the country. The cash reserve ratios of commercial banks are also kept at currency chests. Currency chest are located at authorized selected branches of scheduled banks they do their function on behalf of RBI and they also store the currency as well as notes. The currency chests are expected to distribute banknotes and rupee coins to another bank branches in their area of operation. Currency chest also helps in exchanging mutilated notes and withdraw unfit notes.
Insurance Broker Evaluation 1
Entity Name:
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Registered Office / Local Offices:
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PAN No.:
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IRDA Reg No.:
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List /Location of offices:
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List of Major Clients in FI sector:
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Major area of expertise:
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Detailing liability expertise including details of Top 3 types of liability insurance policies placed by you for FI with number of policies and premium volume
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Number of banks as liability clients in current year
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Book size (Overall Premium of Liability) of Banks
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Book size (Overall Liability Premium) of FIs
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Number of claims settled in liability for banks in last 3 years- specifics on an unnamed basis, nature of policy, claim type, and what claim settled and your role, a case study detailing all these parameters
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Specific liability team size & proposed liability relationship team for IDFC First bank
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In-house lawyers & size of liability claim team with names
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Your top 3 value offerings or program restructuring extended in liability insurance to a bank/ FI client last yearwith details of program improvements that you brought in
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Your top 3 insurance company relationship in FI liability insurance
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Your top 3 reinsurance company relationship in FI liability insurance
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Claims SOP for Liability insurance
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Two references of banking clients in liability space (current client)
Employee Oriented Insurance PRODUCTS •
Group Health Insurance: Coverage for employees and dependents (spouse + children + parents). That covers hospitalization expenses (IPD/OPD) of the insured along with a variety of other hospitalization related expenditure
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Group Accident: Insurance for employees only: Policies covering accidental death and disablement
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Group Overseas Travel: Short-term accident and illness coverage for employees on business trips or assignments outside their home country.
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Group international Medical: Coverage for two or more employees on long-term assignment. Includes Dental, Vision, Life, and other options.
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Top up Plans: Top up policy in addition to the base policy with the portability option.
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