Beazley and Hiscox launch investigation and inquiry policy

Lloyd's insurers Beazley and Hiscox have teamed up to offer an extended ‘investigation and inquiry’ insurance, providing companies with enhanced cover for regulatory investigations at a time of heightened regulatory scrutiny.

The enhancement comes at a time when regulatory authorities are placing greater focus on investigations.

The number of investigations opened by the US Securities and Exchange Commission’s (SEC) Enforcement Division in 2014 increased by nearly 10 percent over the previous year, according to the firms.

The division is also building its resources, seeking budgetary approval for 50 new employees in 2016 to reinforce its investigative functions.

Upon the filing of a securities class action against a company, this enhancement provides cover for costs incurred in response to related informal and formal investigations by, or in conjunction with, the enforcement division of the SEC.

Cover is also provided, on a coinsurance basis, for costs incurred in responding to the investigation prior to the launch of the securities class action (look back coverage), as well as those incurred once the securities action is resolved. This is in contrast to traditional solutions which only cover formal investigations that are concurrent with a securities class action.

In addition to the entity investigation coverage, the policy offers protections for plaintiff attorney fees cover in a derivative suit; defence costs for the entity as a nominal defendant in a derivative suit; books and records cover, with a sub-limit; and explicit coverage for class certification fees.

Inquiry cover includes an insured persons attending interviews, meetings and providing documents in connection with requests by court appointed trustees and liquidators, third party litigation against the company (in relation to non-indemnifiable loss) and internal investigations (also in relation to non-indemnifiable loss). Inquiry cover also includes sworn testimonies.

The extension of cover builds on the success of the directors and officers (D&O) initiative launched by Beazley and Hiscox in 2014 to offer brokers and clients increased choice and flexibility in the market. Through this the insurers are able to provide materially higher limits and offer additional solutions to complex risks.

"Regulatory investigations and inquiries are increasing in frequency and intrusiveness,” said Neal Wilkinson, head of Beazley's global management liability team.

“By providing cover before, during and after a shareholder class action, we are significantly increasing the protection afforded to companies confronting the risk of prolonged regulatory scrutiny.”

Chris Warrior, head of management liability at Hiscox London Market, added: "Clients look to the Lloyd’s market for cover that is precisely tailored to the risks they face.

“Recognition of costs incurred in responding to a formal or informal investigation, but which otherwise do not trigger a typical D&O policy, has been clearly identified as a primary concern of clients. This product directly responds to this gap in coverage.”