News and Publications

  • Why Baronsmead? - Insurance Fact Sheet
    Why Baronsmead? - Insurance Fact Sheet
    Published 24.03.2014

    Baronsmead Partners LLP is a niche financial risks insurance broker dedicated to the investment management industry, with particular specialism in hedge fund and prive equity requirements. 

    Please click here for the full document 

  • Baronsmead AIFMD Advice - Dear AIFM
    Baronsmead AIFMD Advice - Dear AIFM
    Published 23.12.2013

    At Baronsmead, we always aim to be clear and transparent, and have our clients' best interests at heart. So, here is some honest, straightforward advice regarding insurance and the AIFMD.

     

  • AIFMD UPDATE 2013 HFMWEEK SPECIAL REPORT
    AIFMD UPDATE 2013 HFMWEEK SPECIAL REPORT
    Published 13.12.2013

    This report will cover:

     
    REMUNERATION
    The requirements and challenges of setting up a
    remuneration committee
     
    REPORTING
    Analysis of the Directive’s reporting elements
    established in Annex IV
     
    TIMING
    The deadlines fund managers need to meet
    to become AIFM-compliant
     

     

  • Are you covered for defence costs incurred from High Court litigation and SEC regulatory proceedings?
    Are you covered for defence costs incurred from High Court litigation and SEC regulatory proceedings?
    Published 16.08.2012

    The recent High Court decision in Weavering Capital (UK) Limited (In Liquidation) (“Weavering”) v Peterson and the complaint being pursued in the United States against Philip Falcone, founder of Harbinger Capital Partners, are both stark reminders of the importance of purchasing a directors’ & officers’ insurance policy that will adequately cover the costs of defending litigation and dealing with regulatory proceedings.          

      

    The Facts 

      

    In August last year the Cayman courts gave judgment against two directors of the Weavering Macro Fixed Income Fund to the tune of $111m. The separate High Court proceedings brought by the liquidators of Weavering sought relief under the Insolvency Act 1986 against personnel directly involved in the running of the claimant company. There were ten defendants in total including Magnus Peterson, the Founder, Chief Executive and Managing Director of Weavering who was found guilty of breaching his fiduciary duties and in the tort of deceit. Other defendants were found guilty of negligence for failing to act with reasonable skill and care and for making fraudulent payments, all of which resulted in damages being awarded for the sum of $450m.

     

    The SEC has made various allegations against Mr Falcone and Peter Jenson, Harbinger’s Chief Operating Officer based around two allegedly fraudulent schemes which disadvantaged the interest of investors and had a serious impact on the value of a fund under their management. The regulator began its investigations in late 2010 but only filed its 28 page complaint at the United States District Court of New York on 27 July 2012.            

      

    Defence Costs

      

    Magnus Peterson represented himself in the High Court proceedings with several of the other defendants instructing Stephenson Harwood. Jones Day acted for Weavering supported in court by Robert Anderson QC and a following Junior. An appeal is outstanding and it is unclear at this stage how the issue of costs will be dealt with but it is likely that should the appeal prove unsuccessful the defendants will be ordered to pay the claimant’s costs in addition to their own. Given the complexity of the facts and a trial which lasted for over a month, it is reasonable to assume that the costs involved will amount to several millions of pounds.

     

    The SEC investigation in the Harbinger matter has also been an extremely long process and with the complaint only recently being issued by the court, dealing with and defending the regulatory investigation will have placed an enormous financial burden on the directors and officers of Harbinger.           

      

    Coverage for Civil Proceedings 

      

    The implications of the above two matters in terms of coverage under a directors’ & officers’ liability policy need to be considered separately for defence/appeal costs and damages. The damages awarded against the named defendants in the High Court proceedings include elements of dishonesty and where that is the case the individuals will not be able rely on cover under their D&O policy. There were however findings of ‘honest’ negligence including breaches of fiduciary duties for which the damages awarded would ordinarily be recoverable.

     

    In terms of defence costs, it is standard practice for those costs to be advanced to the insured prior to a finding of fact or final adjudication. Some of the defendants in the case decided to represent themselves which suggests that the policy in place may not have been designed correctly or was not broad enough to trigger and with an appeal pending, it is unclear how the legal costs will be funded by the litigants going forward.

     

    Regulatory Investigations 

     

    It is a common misconception that court proceedings is the most time consuming and costly of all methods of dispute resolution but the reality is that regulatory investigations can be just as expensive. The ongoing SEC investigation into the actions of the Harbinger management team illustrates the point and emphasises once again the importance of having cover in place to meet the fees and legal costs of dealing with a regulatory investigation and the subsequent onset of proceedings.   

     

    Key points to help ensure coverage under a directors’ & officers’ insurance policy 

      

    1. Narrow language used in dishonesty exclusions to ensure policy only excludes proven dishonesty  

     

    2. Cover for defence costs up to a finding of final adjudication allowing for appeal costs to be recovered    

     

    3. Negotiation with insurers to agree the rates charged by defence lawyers and agreement of a process for the advancement of defence costs before judgment is handed down

     

    4. Broad and clearly defined insuring clauses providing cover for the costs incurred in dealing with a regulatory investigation and subsequent court proceeding 

     

    5. Avoidance of restrictive definitions which have the effect of limiting cover to certain individuals and specific types of investigations     

      

    The Weavering litigation has been ongoing for a long period of time and although two judgments have been handed down by two different courts this is unlikely to be the end of the story. An appeal ruling is due later this year following the decision of The Grand Court of the Cayman Islands in August 2011 and an appeal is pending following the recent High Court decision. The SFO has also recently re-launched its investigation into the affairs of Weavering Capital UK.

     

    Whilst it remains to be seen what findings are made against the individuals in the Harbinger SEC proceedings, both cases illustrate how expensive dealing with litigation and regulatory proceedings can be. Very often a properly constructed directors’ and officers’ insurance policy is one of the few ways of funding a defence in the event of complex disputes.     

  • Settlement of claims remains a big concern for hedge fund managers
    Settlement of claims remains a big concern for hedge fund managers
    Published 26.06.2012

    Main findings of the Baronsmead trends survey

    82% of managers buy Professional Indemnity (PI) insurance, up from 64% last year

    93% of Directors are covered by Directors’ & Officers’ (D&O) liability insurance, up from 86% last year

    83% of managers who have had a claim say there is a lack in quality of the claims handling

    The ability to raise new capital and performance returns ranked as top priorities for hedge fund managers in 2012

    The perceived threat of the US and EU regulation will be greater than the actual impact managers believe, but remain the top concerns for insurers

    The majority of managers have seen prices fall over the last 24 months but as insurers start to see levels of claims increase, they believe prices will start to flatten

    The structure of the insurance policy and scope of cover is now being assessed during the investor due diligence process

              

    The poor management and settlement of a claim remained one of the biggest concerns for managers, according to Baronsmead Partners LLP (“Baronsmead”), the specialist financial risks insurance broker, which has published its Hedge Fund Insurance Benchmarking Trends 2012 Survey. Delays in claims payment due to the structure of the policy, exclusions and outsourcing of a claim to a third party / regional office were the biggest concerns.

     

    Another key finding is that 82% of hedge fund managers said they purchased Professional indemnity (PI) insurance, compared to 2010 when only 64% of hedge fund managers took out PI insurance. The AIFM directive has been one of the main drivers behind this current trend however most managers already purchase more than the minimum recommended limit of 1% of AUM. Managers also stated that PI was now a requirement demanded by more and more investors.

       

    The purchase of insurance by Directors continues to rise with 93% now covered by D&O insurance. The Weavering case and the inclusion of Irish and Luxembourg fund directors in US litigation arising from Madoff exposures, has led directors to review the quality of the policies to ensure they are covered in the event of a claim.

     

    Raising money and performance returns were identified as top priorities for managers in 2012. Ultimately, investors are intent on seeing positive returns and the ability to generate these along with raising new capital will have a significant impact on hedge funds in the coming year.

     

    Managers consider the impact of the AIFM directive and US regulation as low. Virtually all managers acknowledge that it would significantly increase costs for both the custodian and themselves. However regulation is where insurers see the most perceived risk and where they see most claims arising from in the future following the raft of new regulation coming into force.   

       

    Shyam Moorjani, Managing Partner, commented:

    “We are delighted with the response to our second annual insurance survey which provides a valuable tool for COOs to benchmark their limits, premiums and claims service against their peers. Our report confirms that there is genuine concern by hedge fund managers in getting claims paid. However key to this is a properly structured policy with insurers that have a good track record of paying a valid claim, allowing the transfer of legal, operational, regulatory and employment risks that firms face, to the insurers.”

       

    Robert Kelly, Senior Partner, added:

    “It is no great coincidence that more and more managers are taking out PI and D&O Insurance. While there is no major panic around the AIFM directive being implemented, managers are worried about some of the knock-on effects it might have on their businesses. With the Weavering Capital case still fresh in the memory, many investors are insisting that the fund directors and the fund itself are adequately covered.”

     

    The report summarises survey feedback from a total of 120 hedge fund managers from London-based hedge funds with combined assets under management of over USD200 billion. The report also contains responses and comments from 9 of the leading hedge fund insurers.

    For a copy of the survey please email Shyam Moorjani (shyam.moorjani@baronsmead.com)

     

    The research was undertaken by Hansard Research  

     

  • Best Insurance Firm - HFM Awards 2012
    Best Insurance Firm - HFM Awards 2012
    Published 10.04.2012

    BARONSMEAD WINS BEST INSURANCE FIRM FOR SECOND YEAR IN A ROW.

    Baronsmead Partners LLP (“Baronsmead”), the specialist financial risks insurance broker, has won an award for Best Insurance Firm at a major industry event in London.

    The HFMWeek European Hedge Fund Services Awards recognise companies that have outperformed their peer group over the course of 2011.

    The awards were judged both quantitatively and qualitatively, producing final shortlists of candidates that have demonstrated financial progress, growth and genuine innovation across a number of different business areas.

    Shyam Moorjani
    , Managing Partner, who collected the award on behalf of the company, commented: “We are delighted to have won this award for the second year in a row, which is independently judged by hedge fund managers and other service providers, and recognises the expertise and quality of services we provide.

    “We continue to differentiate ourselves on our products, claims management and client servicing, so it is very rewarding to receive this award from such a respected hedge fund publication,” said Moorjani.

    Robert Kelly
    , Senior Partner, said: “The prestigious HFM Award is testament to the strong team we have at Baronsmead. Over the last 24 months, we have continued to invest significant resources in our infrastructure and operations as the number of our hedge fund client’s increase.

    “We continue to recruit and retain the very best professionals with the knowledge to understand our clients’ business requirements. The team includes a specialist insurance solicitor from a leading city law firm as our General Counsel and a seasoned Hedge Fund COO as our Managing Partner,” said Kelly.

    Notes for Editors:


    Based in London, Dublin, Guernsey, Jersey and Cayman Islands, Baronsmead is an independent, specialist risk consultant and broker providing financial risks insurance, guidance and advice to the investment management industry.

    Baronsmead provides managers and their funds with risk transfer protection from the legal, regulatory, operational and employment risks they face. Baronsmead specialises in Professional Indemnity Insurance (PI), Directors’ and Officers’ Liability Insurance (D&O), Employment Practice Liability Insurance (EPLI) and Tax Liability Insurance for fund management groups covering both personal and corporate liability.

    Baronsmead’s core business is the investment management industry with the main specialism being the hedge fund sector and Baronsmead has the largest dedicated hedge fund financial risks insurance team in London.

    Clients range from long established funds to start up funds. Baronsmead currently provides insurance services to over 80 hedge fund management groups and over 500 funds with combined assets under management of approximately $180 billion. As Lloyd’s brokers, Baronsmead has access to leading insurers as well as syndicates registered under the Lloyd’s umbrella. This allows Baronsmead to provide a wide spread of pricing, products and excellent account management services.

    For more information please visit www.baronsmead.com

    Contacts:


    Jake Tobin, Business Development Manager +44 (0) 20 7529 2304

    Shyam Moorjani, Managing Partner +44 (0) 20 7529 2394

    Robert Kelly, Senior Partner +44 (0) 20 7529 2302

  • Best Insurance Firm - HFM Awards 2011
    Best Insurance Firm - HFM Awards 2011
    Published 31.05.2011

    BARONSMEAD WINS BEST INSURANCE FIRM 

     

    LONDON, (June 1, 2011) Baronsmead Partners LLP (“Baronsmead”), the specialist financial risks insurance broker, has won the Award for Best Insurance Firm from HFMWeek for its outstanding performance in 2010.

     

    The HFMWeek European Hedge Fund Services Awards 2011 recognise companies that have outperformed their peer group over the course of 2010. The awards were judged both quantitatively and qualitatively, producing final shortlists of candidates that have demonstrated financial progress, growth and genuine innovation across a number of different business areas.

     

    Shyam Moorjani, Managing Partner, commented after receiving the award: “This award is public recognition that we are providing the right kind of service for our clients and that we are seen as leaders in our field by the industry. Our focus on client services, continued product innovation and excellent claims handling, has helped us to ensure that we keep pace with the changing market conditions and customer demand.”

     

    Robert Kelly, Senior Partner, said: “The prestigious HFM Award is testament to the strong and market focused team we have at Baronsmead. Over the last 24 months, we have invested significant resources in our infrastructure and operations, with continued growth planned for the future. We continue to recruit and retain the very best professionals with the knowledge to understand our clients’ business requirements. The team includes a specialist insurance solicitor from a leading city law firm as our General Counsel and a seasoned Hedge Fund COO as our Managing Partner.” 

     

    Notes for Editors

    Based in London, Dublin, Guernsey, Jersey and Cayman Islands, Baronsmead is an independent, specialist risk consultant and broker providing financial risks insurance, guidance and advice to the investment management industry. Baronsmead provides managers and their funds with risk transfer protection from the legal, regulatory and operational risks they face. Baronsmead specialises in Professional Indemnity Insurance (PI), Directors’ and Officers’ Liability Insurance (D&O), Employment Practice Liability Insurance (EPLI) and Tax Liability Insurance for fund management groups covering both personal and corporate liability. It has recently launched the first of its kind UCITS Fund Directors’ and Officers’ Liability Insurance Cover.

     

    Baronsmead’s core business is the investment management industry with the main specialism being the alternatives sector and Baronsmead has the largest dedicated hedge fund financial risks team in London.

     

    Clients range from long established funds to start up funds. Baronsmead currently provides insurance services to over 70 hedge fund management groups and over 450 funds with combined assets under management of approximately $170 billion. As Lloyd’s brokers, Baronsmead has access to leading insurers as well as syndicates registered under the Lloyd’s umbrella. This allows Baronsmead to provide a wide spread of pricing, products and excellent account management services. 

     

    For more information please visit www.baronsmead.com 

     

    Contacts:

     

    Shyam Moorjani, Managing Partner +44 (0) 20 7529 2394

     

    Robert Kelly, Senior Partner +44 (0) 20 7529 2300

     

    Philippa Aylmer, Business Development Manager +44 (0) 20 7529 2302

     

  • New UCITS Fund Directors’ and Officers’ Liability Insurance Cover Launched
    New UCITS Fund Directors’ and Officers’ Liability Insurance Cover Launched
    Published 17.03.2011

    Baronsmead unveils the UCITS Fund Directors’ and Officers’ Liability Insurance Cover, a unique offering providing protection against litigation for UCITS Fund Directors.

    LONDON, (March 14, 2011) Baronsmead Partners LLP (“Baronsmead”), the specialist fund insurance broker and risk consultant, today announces the launch of the UCITS Fund Directors’ and Officers’ Liability Insurance Cover, the first policy of its kind that is specifically targeted at the exposures of the UCITS fund industry.

    Under the terms of the UCITS Directive, Directors of the fund management company are responsible for supporting all the activities of the fund. The UCITS Fund Directors’ and Officers’ Liability Insurance Cover protects directors against any actual or alleged breach of the eight key managerial functions: decision-making, monitoring: compliance; risk management; investment performance; capital; internal audit, financial control or supervision of delegates. Importantly, it also protects Directors against any actual or alleged breach by third party service providers for which the directors are vicariously liable.

    Additionally, the UCITS Fund Directors’ and Officers’ Liability Insurance Cover protects against any actual or alleged breach of specific product rules which include the provisions relating to investments into any one open-ended fund not exceeding a maximum of 20% NAV, investment into non-UCITS open-ended funds not exceeding a maximum of 30% NAV in the aggregate, and a UCITS fund may not owning in excess of 25% of the shares or units of another single fund.

    “The prospect of a claim against Directors remains a real threat and the growing popularity of UCITS funds has led to the need for an insurance product that specifically protects the Directors of the funds. The UCITS Fund Directors’ and Officers’ Liability Insurance Cover has been designed to cover claims arising out of breaches of the management and product functions prescribed in the UCITS directive.” said Robert Kelly, Founder and Senior Partner, Baronsmead.

    Notes for Editors

    Based in London, Dublin, Guernsey and Jersey, Baronsmead is an independent, specialist risk consultant and broker providing financial risks insurance, guidance and advice to the investment management industry. We provide managers and their funds with risk transfer protection from the legal, regulatory and operational risks they face. We specialise in Professional Indemnity Insurance (PI), Directors’ and Officers’ Liability Insurance (D&O), Employment Practice Liability Insurance (EPLI) and Tax Liability Insurance for fund management groups covering both personal and corporate liability. Our focus is solely on the investment management industry and our main specialism is the alternative sector. We have the largest specialist financial risk team in London and employ an insurance lawyer from a leading city law firm as our General Counsel and a Hedge Fund COO as our Managing Partner.

    Our clients range from long established funds to start up funds. We currently provide insurance services to over 65 hedge fund management groups and over 400 hundred funds with combined assets under management of approximately $170 billion. As Lloyd’s brokers we have access to leading insurers as well as syndicates registered under the Lloyd’s umbrella. This allows us to provide a wide spread of pricing, products and excellent account management services. 

    For more information please visit www.baronsmead.com

    Contacts:

     

    Shyam Moorjani, Managing Partner. +44 (0) 20 7529 2394

     

    Robert Kelly, Senior Partner, +44 (0) 20 7529 2300

     

    Philippa Aylmer, Business Development Manager +44 (0) 20 7529 2302

  • Insurance benchmarking for COOs
    Insurance benchmarking for COOs
    Published 05.05.2010

    These days hedge funds never seem to be far from the glare of regulators and politicians alike, and it is the Chief Operating Officers (COOs) and Chief Financial Officers (CFOs) that are on the front line. Increasingly they are having to find ways of protecting themselves and their funds.

    One way in which they are doing this is through insurance cover. Our survey on hedge fund insurance, sponsored by Baronsmead Partners LLP, was conducted with the aim of i) shedding some light on the various insurance strategies that hedge funds deploy and ii) determining satisfaction levels and service standards across the insurance market.

    The survey focused on two key areas: Directors’ & Officers’ Liability (D&O) Insurance and Professional Indemnity (PI) Insurance and the findings are intended to enable COOs and CFOs to benchmark their financial risks cover against that of their peers by comparing limits and premiums. The analysis did not make a qualitative call on whether their cover or policies represent value for money.

    Over the last few months, we gathered data and opinions from 50 firms via an online questionnaire and through telephone interviews. These 50 respondents represent a broad range of investment styles and manage assets ranging from US$25 million to US$25 billion. Almost half of the respondents stated that they were covered by a composite policy. Composite insurance covers both funds (D&O) and the manager (PI) under one single policy and is a popular option as it is considered to keep premium costs down; it is also popular with insurers because it restricts cover. The composite approach creates conflicts of interest between the fund and the manager and in most cases restricts a fund versus manager claim. This is important because the fund is usually the natural claimant against the manager.

    Of those respondents who said they purchased either D&O or PI insurance, 86% purchased D&O and 64% purchased PI. It is surprising that the takeup rate for PI cover is not higher although this may reflect a natural suspicion of the insurance industry. Whilst the FSA has not made it compulsory to take out PI Insurance (although there is talk of this happening), there are enough reasons to make it worthwhile, for example, the increased threat of regulatory action and the fact that lawsuits against hedge fund managers are rising, both in number and amount. Smaller fund managers in particular, will be more exposed as they may not have the balance sheet strength to deal with a lawsuit or a significant trade error loss. There is also an emerging trend for potential investors to demand PI cover in addition to D&O cover.

    It is also surprising that there is not a 100% take up rate for D&O Insurance. Whilst there have been few claims against directors in the past, this looks set to change as tougher enforcement measures come into play: executive and non-executive directors and senior management may face increased personal exposure to regulatory sanctions. Overall, most managers were generally satisfied with their broker. However, it was a different story for those funds that had made an insurance claim. In these cases, half of the respondents were unhappy saying they found the claims process lengthy, with the underwriters’ lawyers very slow in processing the paperwork.

    The reality is that hedge fund COOs and CFOs only get to see the quality of the insurance product, claim management and their choice of insurer when they have a claim.