FGIB:Protect Against Internal & External Hazards with a Financial Institution Bond

To help prevent fraud and dishonesty, internal precautions such as dual controls, separation of duties, mandatory vacation time and operational audits are good deterrents. However, every financial institution – from a community bank to commercial lenders and investment managers – needs insurance coverage when criminals are successful in getting around internal controls, causing the institution or a customer to sustain a loss. This is where a Financial Institution Bond from Financial Guaranty Insurance Brokers (FGIB) comes in.

What’s Covered with a Financial Institution Bond

We offer a Financial Institution Bond for banks to cover against losses by:

  • Employee Dishonesty
  • Forgery or Alteration
  • Computer Fraud
  • Funds Transfer Fraud
  • Kidnap, Ransom, or Extortion
  • Various Money and Securities Fraud
  • Counterfeiting

The four key forms of Financial Institution Bonds that are employed are:

  • Form 14: designed for stockbrokers, investment bankers, stock exchanges, securities firms and commodity brokers
  • Form 15: designed for mortgage and finance companies and real estate investment trusts (REITs)
  • Form 24 or the “Bankers Blanket Bond”: designed for commercial banks of all sizes, including trust companies, savings and loans, building and loan associations and domestic subsidiaries of foreign banks
  • Form 25: specifically for insurance and reinsurance companies

How Much Coverage?

Deciding the necessary amount of Financial Institution Bond coverage a financial institution requires can present a serious challenge. While calculating the amount of money and securities susceptible to burglary or robbery is a relatively straightforward task, trying to estimate how much an institution might lose as a result of employee dishonesty is much more difficult. Likewise, a third-party breach can also create losses of a larger scale and is more difficult to quantify and anticipate.

Here are some factors consider when determining how coverage to purchase:

  • Amount of cash and securities normally held by the bank
  • Delegation of authority to employees
  • Personnel turnover rates
  • Number of employees and their experience level
  • Extent of trust, information technology, or off-balance sheet activities

Our experienced professionals at FGIB will review these and other factors to help determine how much coverage will meet your firm’s risk profile.