Professional indemnity insurance for fund administrators in Cyprus in 2024.

Fund administrator’s professional indemnity insurance

Even if you’re an experienced fund administrator, mistakes can happen. Regardless of your experience level, there is always the possibility of an error and omission.

Professional indemnity insurance for fund administrators can protect companies from any liability incurred if you allegedly provided poor advice, services, or designs to a client.

After 2017 the number of fund administrators in Cyprus skyrocketed. Requests for comprehensive professional indemnity insurance have also increased significantly.

In this guide to professional indemnity insurance for fund administrators in Cyprus, we will examine all there is to know.

Table of contents

• Who needs a professional liability policy?
• What is professional indemnity insurance for fund administrators in Cyprus?
• Coverages of professional indemnity insurance for fund administrators
• What professional liability insurance doesn’t cover
• How professional liability insurance works
• The law on investment fund administrators in Cyprus
• Professional indemnity insurance for fund administrators cost
• Professional indemnity insurance for fund administrators in Cyprus in 2023 FAQ

Who needs a professional liability policy?

You may be wondering if you need professional liability insurance.

It’s essential coverage for business owners, including fund administrators, who provide services to customers or clients.

You should consider getting professional liability insurance coverage if you:

• Regularly offer advice to customers or clients
• Offer direct professional services to customers or clients
• If you sign a contract that requires you to carry liability coverage.

Professional indemnity insurance for fund administrators will become obligatory in Cyprus in 2023.

What is professional indemnity insurance for fund administrators?

Professional indemnity insurance (or liability insurance) helps cover you and your company against professional mistakes involving your clients or customers.

This insurance type, also known as errors and omissions (E&O), will protect you if you are sued for professional errors resulting in damage or financial losses when you undertake the following tasks:

• Preparation of financial statements and reports, such as profit & loss, income statements, income accruals, portfolio valuations.
• Preparation of fund statistical metrics (such as sharpe ratio, beta, alpha, standard deviation etc.)
• Handling customers enquiries.
• Keeping records of fun redemptions and subscriptions.
• Reconciling corporate actions such as interest, dividends and income.

Coverages of professional indemnity insurance for fund administrators

Professional indemnity insurance for fund administrators covers claims of:

• Negligence
• Inaccurate advice
• Misrepresentation
• Personal injuries, like libel or slander

Your client could sue your business even if you didn’t make a mistake.

Without professional indemnity insurance coverage, you’ll have to pay expensive legal defense costs out of pocket.

What professional liability insurance doesn’t cover

While professional liability insurance covers various claims, it doesn’t cover every circumstance.

It generally won’t protect your business from the following kinds of claims:

Property damage or bodily injury

Professional liability doesn’t cover these kinds of claims. You need a general liability insurance policy to cover property damage and bodily injury claims.

Work-related illnesses or injuries

In addition, you need a workers’ compensation policy to protect your employees from illness or injuries that leave them unable to work and the associated costs.

Data breaches

Professional liability typically doesn’t cover data breach claims. You need data breach insurance (or cyber liability insurance) to safeguard your business from losing your client’s personally identifiable information (PII).

Also, claims related to the following risks are excluded:

• Investment Advice
• Money Laundering
• War & Terrorism
• Security Failure
• Economic and Trade Sanctions

How professional liability insurance works

Most insurance providers design professional liability policies on a claims-made basis with a retroactive date and may include an extended reporting period.

The retroactive date guarantees you will be covered for incidents that occur on or after a specified date.

The extended reporting period grants an extension to cover claims after your policy expires.

This extension is usually within a 30 to 60-day period, but you can extend this for longer than a year at an additional cost.

You will only be covered for claims during the length of your policy and within the extended reporting period.

The claim must be from the covered list of errors or omissions stated in your policy that occurred after your policy’s retroactive date.

You may be covered for the following:

• Damages
• Loss of earnings
• Subpoena assistance
• Legal defense costs
• Disciplinary proceedings

Some professional indemnity policies can be part of an occurrence policy.

Occurrence policies cover you and your business from losses during your policy period, even if the claim is filed after your policy’s expiry date.

The law on investment fund administrators in Cyprus

The Cyprus Securities and Exchange Commission, or CySEC, issued a Consultation Paper in June 2021 to present the proposed Law on Investment Fund Administrators.

After the Consultation Paper’s conclusion, the final proposed law was presented to the House of Parliament for approval.

As per the law’s requirements, fund administrators (and others) will need to have the following:

1. Professional Indemnity Insurance

2. Capital of:

3. €50,000 for offering only fund administration services, or

4. €125,000, if authorized to offer bank account opening, cash management, and fund administration services.

Conditions of professional indemnity insurance for fund administrators

Professional indemnity insurance needs to meet the following conditions:

1. Be a minimum of one year;
2. The termination notice period shall be a minimum of 90 days;
3. The insurance coverage equals 1% of the total assets under administration.

While some insurance risks are straightforward to cover (such as home or auto insurance), specialized insurance like professional indemnity for fund administrators is less so.

Like with any insurance, it’s best to promptly begin the insurance application and apply for quotes to receive a competitive price.

The Law on Investment Fund Administrators will make the Cyprus Alternative Investment Funds (AIFs) more attractive.

Professional indemnity insurance for fund administrators cost

The cost of professional indemnity insurance is unique to your business.

General factors that affect the cost of fund administrator's professional indemnity insurance include the following:

• Turnover of your business
• Existence of subsidiaries or parent companies
• Number of licensed professionals
• Experience of licensed professionals
• The size of your business (employees and clients)
• Geographical distribution of your clients
• Jurisdiction
• Territorial limits
• Limit of liability (i.e. coverage amount)
• When your business was established
• Terms
• Exclusions
• Previous claims history

When you would like to acquire a professional indemnity insurance quote, you will need to provide specific business documents, such as:

• Copies of work contracts
• Proof of any quality control procedures
• Previous insurance and claims history

Financial statements of your company will not be required except if you also require Directors and Officers coverage.

You can work with one of our insurance specialists to obtain the right indemnity insurance coverage for your business.

Professional indemnity insurance for fund administrators quotes

Regardless of your business’s experience level, errors and omissions can occur anytime.

Professional indemnity insurance can protect companies and self-employed individuals from liability for alleged bad advice, services, or designs.

We offer professional indemnity insurance with coverage for the following:

• Breach of copyright
• Breach of confidentiality
• Loss of goods and money
• Loss of documents and data
• Third-party claims due to defamation or slander
• Third-party claims arising from any negligence on your part
• Third-party financial claims arising from employees’ fraudulent actions.

Additional provisions

• Court expenses
• Loss of documents
• Extensive experience in insurance underwriting
• Extensive claims period for professional indemnity
• Long-term relationships of mutual trust with our clients
• Third-party claims due to employees’ malignant actions
• Leading position on a global level in the general insurance market
• Specialized claims management, with particular sensitivity and discretion toward your business relations.

The usual exclusions of our contracts relate to any losses in connection with any claims related to the following:

• Insolvency
• War and terrorism
• Infringement of patents
• Pollution of the environment
• Infringement of trade secrets
• Government and regulatory actions
• Bodily injury and property damage
• Employment harassment or discrimination
• Misdeeds (criminal, dishonest, or fraudulent acts)
• Mechanical, electrical, or telecommunications failure
• Work carried out by joint venture of which the insurance forms part
• Computer viruses or failure to prevent unauthorized access to your company’s systems
• Contractual liability or other obligation assumed that goes beyond the duty to use such skill and care as is ordinarily applied to your usual professional services.
• Claims made before or pending at the inception of this policy, excluding all cases to which we provide retroactive coverage.

Who can be insured?

• Partners
• Employees
• Heirs of all the above
• The natural person as a freelancer
• The legal entity through which the profession is practiced

Pitsas Insurances has 35 years of experience and can help to provide the best solution for your professional indemnity insurance needs.

If you would like to receive a hassle-free quote, see here.

Professional indemnity insurance for fund administrators in Cyprus in 2023 FAQ

What is the difference between general liability and professional liability insurance?

General and professional liability insurance are both essential for business owners, but they provide different types of coverage.

General liability insurance covers bodily injury or property damage claims. In contrast, professional liability insurance covers errors and omission claims.

Who needs professional liability insurance?

If you or your business offers professional advice or services to clients and customers, it is advisable to carry professional liability insurance.

As well as fund administrators, the following businesses can benefit from this type of coverage:

• Healthcare
• Consultants
• Accounting firms
• Real estate agents

Professional liability insurance is required in some places of work. For example, it may be required for certain healthcare practitioners or businesses.

What is the purpose of professional liability insurance?

Most business owners and self-employed people aim for excellence, but humans make mistakes. A mistake that financially harms your client can lead to legal action.

Professional liability insurance protects you when you face lawsuits for mistakes you or your company has made.