Creating new products or services underpinned by new technologies and business models is likely to increase the risks faced by a company, its directors and its investors. In many jurisdictions, directors face unlimited personal liability and companies face a range of operational risks, as well as risks relating to intellectual property and regulatory and transactional liabilities.
Aon’s specialist FinTech team understands the challenges of connecting new business models into traditional insurance products and has the expertise to navigate the insurance market in pursuit of the best deal for our clients. We have worked with insurers to look to develop solutions that protect against some of the unique exposures faced by FinTechs, to help secure the value of your business and give comfort customers and investors alike.
Some core considerations are set out below:
Core risks
FinTechs encouter a combination of risks that financial services and technology companies have always faced: errors and omissions (professional indemnity/liability), crime and cyber are core risks that could impose significant unplanned costs on your business. Moreover, many clients/partners will insist on certain levels of cover before contracting.
We understand that standard insurance market products may not fit new and unique business models well and may lead to gaps or overlaps in cover and are on hand to help navigate and create bespoke solutions to overcome this.
Impact of novel technologies
FinTechs often harness novel technologies, such as AI and blockchain. This is likely to change the severity and/or velocity of many existing risks faced by ‘traditional’ financial services models, not least because of emerging or uncertain regulatory environments.
We work with FinTech risk and compliance managers to understand the liabilities and insurance implications of novel technologies.
Regulations
Regulated FinTechs could face the cost of a regulatory investigation, fines and remediation costs. Many of these can be met by a well-constructed professional indemnity policy.
Even FinTechs (or Regtechs), who are not directly subject to regulation may face enhanced liabilities as they are likely to be providing services to companies who could face a regulatory breach if the services fail to perform.
Intellectual Property
IP is a key driver of a FinTech’s value, insurance can either help meet the costs of defending alleged or actual IP infringements or it can act as a ‘proactive protection’ to strategically pursue litigation against established competitors who may have more resources.
We can also help you look to identify and articulate the value of your IP, which may allow you to unlock additional capital
M&A and IPOs
Whilst an exit strategy may not be at the forefront of a company’s plans during launch, Aon recognises that for many founders this is a critical area of concern. Our M&A team is on hand to assist with structuring a risk transfer programme around whatever developments may arise.
Insurance programme design for FinTechs
No single business is alike, so we always aim to gain a full understanding of you and your business before looking at risk transfer to insurers. However, the core elements of cover are likely to comprise of one or more of the following:
- Directors and Officers (‘D&O’)
- Professional Indemnity (‘PI’) or Technology Errors and Omissions (‘Tech E&O’)
- Cyber
- Crime
- Intellectual Property Liability
When combined together, these covers can be an effective way of protecting your company’s balance sheet, as well as protect the directors’ personal assets. Specialist areas of the insurance market such as credit and surety can also be deployed to benefit the balance sheets of FinTechs operating in the lending and payments space.
A FinTech will also need to consider the general insurance covers commonly purchased by companies in other sectors, such as: Property Damage and Business Interruption (BI), Terrorism, Employers’ Liability, Public Liability, Personal Accident, Business Travel, Key Person, Employment Practices Liability (EPL).
Aon has a wide breadth of capability, we can start off small and simple and grow the programme as the company does.
Ed Pugh
Aon UK FinTech Development Director
Tom Davis
Aon UK FinTech Executive Director