RegAlert2013-08-20
Added · Updated
Adequacy of professional indemnity insurance for AIFMs
Managers of alternative investment funds (AIFMs) must ensure their professional indemnity insurance meets specific coverage thresholds, requiring minimum limits of 0.7% of managed portfolio value for individual claims and 0.9% for aggregate annual claims. If an insurance policy fails to satisfy these criteria or if the maximum coverage limit falls below the required 0.9%, the AIFM must immediately hold additional own funds amounting to 0.01% of the total value of the portfolios managed. AIFMs are responsible for monitoring compliance with these minimum coverage requirements and must notify the Dutch Central Bank (DNB) immediately if the insurance becomes invalid, as failure to maintain sufficient capital constitutes a breach of solvency requirements.
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Factsheet
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In order to hedge against liability risks arising from professional negligence, managers of alternative investment funds (AIFMs) must either provide additional own funds or take out professional indemnity insurance (PII). PII must satisfy specific conditions to qualify as such under Section 63b of the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels Wft).
Published: 20 August 2013
Requirements of professional indemnity insurance
The requirements which PII must meet are laid down in Article 9(7)-(9) of the Directive on Alternative Investment Fund Managers (AIFMD) and Articles 12 to 15 of Commission Delegated Regulation (EU) No 231/2013 supplementing Directive 2011/61/EU with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision. Article 13 lists the qualitative requirements which AIFMs must meet to ensure adequate management of their professional liability risks. They must check the criteria listed below before an insurance policy can qualify as PII within the framework of the AIFMD. DNB expects AIFMs that wish to use PII to explain in detail, stating arguments, based on the criteria listed below, and including references to relevant passages in the policy conditions, why it is obvious that the PII taken out satisfies the requirements.
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Lineage: In force
Source: De Nederlandsche Bank — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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