XL Catlin Covers Commercial Crime Capers

PRODUCT: Commercial crime policy

COMPANY: XL Catlin

BEST RATING: A (Excellent)

AVAILABILITY: Coverage is available on an open-brokerage basis.

FOCUS: XL Catlin, which has traditionally offered financial institution crime coverage, has stepped into the commercial arena with a new crime policy.

According to a 2014 report by the Association of Certified Fraud Examiners, the typical organization loses 5% of revenue each year to fraud. While the median loss sustained is $145,000, more than 22% of cases involve losses of at least $1 million.

“We’re seeing significant losses—well into the seven figures even for the smaller end of the spectrum,” says Greg Bangs, chief underwriting officer of global crime, XL Catlin. “Every company of any size should include crime coverage in their risk management and insurance portfolio.”

The commercial crime policy augments the company’s products such as EPLI and D&O. When independent agents offer it as part of a package, the “overall spend is not going up that much,” Bangs says—but the client gains protection “against a significantly growing exposure in the world right now.”

Businesses that have typically considered themselves immune from crime fraud are vulnerable, including medical, law and accounting firms. “These partnership-type operations are suddenly experiencing large losses and realizing that the traditional employee theft controls they’ve had in place are really not either keeping up with the latest trends in employee fraud or, frankly, are not as robust as they should be—as they would be, for example, in a traditional commercial public company,” Bangs says.

UNDERWRITING: In the commercial crime policy, XL Catlin offers up to $25 million maximum limits, written on a per-occurrence basis. The policy is available on a primary, excess and quota-share basis. There is no aggregate limitation and no set minimum deductible.

XL Catlin underwrites through two units. The first underwrites public companies, as well as private companies with assets greater than $250 million and more than 1,500 employees. The second unit underwrites private companies with up to $250 million of assets and fewer than 1,500 employees.

The commercial crime form is available on both a loss-sustained and a loss-discovery basis, which treats prior acts differently. A loss-sustained form provides limited conditional coverage for acts prior to the current policy period, and “coverage has to have been in place with no breaks whatsoever between the time the incident was originally sustained up to the current date,” Bangs explains. If for any reason a break in coverage exists, “then coverage only goes back to that break in coverage.”

By contrast, Bangs says, “a loss-discovered form gives in effect full unfettered prior acts coverage,” so if fraud is discovered during the policy period, coverage extends back to the occurrence, even if a company was not insured under the policy at the time.

The commercial crime policy includes, but is not limited to, protection against employee theft, providing coverage for loss of or damage to money, securities and other property resulting directly from theft committed by an employee; forgery or alteration resulting in losses directly from forgery or alteration of checks, drafts, promissory notes or similar instruments; theft of money and securities on and off premises, resulting in losses of money and securities inside the insured’s premises or a financial institution’s premises; robbery or safe burglary for loss or damage to property other than money or securities; computer and funds transfer fraud covering losses that result directly from fraudulent entry of or change to electronic data or computer programs; and money orders and counterfeit money to cover loss resulting directly from a company accepting these in good faith in exchange for merchandise, money or services.

Endorsements include identity fraud, telephone toll fraud, safe depository and client’s property.

MINIMUM PREMIUM: None.

TARGET: Bangs says XL Catlin has “a very broad underwriting appetite and will consider nearly all classes of business” that have client funds under management, including third-party groups, TPAs, public and large private companies as well as small to midsize companies.

COVERAGE TERRITORY: Currently admitted in 46 states, with plans to extend coverage nationwide by first-quarter 2016.

CONTACT: Greg Bangs, chief underwriting officer global crime; XL Catlin, 200 Liberty Street, New York, New York 10281; 212-915-6871

Ronimarie Acord is an IA contributor.