Irish insurer launches ‘world first’ investment protection

Dublin-based insurance broker Robertson Low has launched a product offering Irish investors coverage for as much as €250,000 of losses resulting from an investment firm collapsing due to fraud, negligence and forms of cybercrime.

The firm said the product, FundInsure, underwritten by Lloyds of London, "is believed to be the first of its kind in the world". It will offer significantly more protection than the State's compensation scheme, operated by the Central Bank, which only pays out 90 per cent of an investor's losses subject to a €20,000 cap.

"While recent years have seen considerable improvement in the regulation and supervision of investment firms in Ireland . . . no system of supervision can provide complete protection for investors, particularly in the event of fraudulent intent," said Andrew Low, managing director of Robertson Low.

“History has shown that even the most reputable of investment firms are susceptible to the risk of financial failure and the loss of client assets, whether from poor corporate governance, from the fraudulent acts of committed individuals or, topically, as a result of cyber-attack.”

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Since the State compensation scheme was set up two decades ago, Ireland has seen the collapse of Cork stockbrokers, W&R Morrough, in 2011, Custom House Capital (CHC) in Dublin in 2011 and Asset Management Trust (AMT) in 2016.

The latest report from the scheme, published in December, said the liquidator and administrator of CHC has calculated that investors are due up to €19.7 million in compensation. It had also set aside €183,000 in provisions to cover potential future compensation arising from AMT’s implosion.

While the State compensation scheme, which is funded by the investment industry in Ireland, only makes payments to private customers of a failed investment firm, Robertson Low also offers coverage to professional investors.

The new insurance product covers money managed by an investment firm where losses arise from “theft, misplacement, destruction, burglary robbery, embezzlement, wrongful abstraction, larceny, false pretences and fraud,” according to Robertson Low.

With regard to cybercrime, the firm offers coverage for any losses as a consequence of an investment firm’s computer system “being the subject of a malicious code and/or a computer virus or process, or any other electronic system being used in the commission of the act(s) of theft, burglary and other criminal taking”.

However, policies do not cover “ransomware”, a type of cyber attack where a computer system is hacked and can only be unlocked on payment of a ransom.

“Typically, client assets are not affected by this type of cybercime which are designed to inflict harm, and so are excluded from the FundInsure insurance policy,” it said.

Policies do not provide coverage for investment performance.