Pension Scheme and Benefit Plan Liability Insurance Factsheet

PENSION SCHEME AND BENEFIT PLAN LIABILITY
BROKER FACTSHEET
Chubb is a leading provider of pension scheme and
benefit plan liability insurance.
Chubb’s specialist cover insures pension schemes and other benefit plans, trustees
thereof, corporate trustees, companies, directors, officers and employees for legal liability
from claims and prosecutions against them for wrongful acts in respect of the operation
of benefit plans. It also insures them for representation costs in benefit plan-related
investigations of them by regulators.
Why do your
clients need
pension scheme
and benefit
plan liability
insurance?
• Many trustees running schemes are volunteers. Whether a volunteer or not, the
obligations placed on them are significant and can attract personal liability
• The law requires those involved with plans to be familiar with all relevant scheme
documentation including the deed, rules, and statement of investment principles.
Such obligations are onerous, and even the most conscientious can make a mistake
or get caught out by frequently changing laws
• The Pensions Regulator can take action against trustees who commit breaches of
trust or against those who have breached pensions law
Policy Offering
Cover for pension schemes and other benefit plans, trustees thereof, corporate
trustees, companies, directors, officers and employees against:
• Wrongful acts, errors or omissions
(including administrative error, misstatement, denial or change of benefits, improper
advice, misleading disclosures, conflicts of interest, imprudent investment of scheme
assets, violation of scheme documents, default on an obligation to contribute to the
plan)
• Breach of duty
• Breach of trust
Limits
•Up to £15 million (flexible options are available on limits)
Appetite
We like to insure
We are cautious of
4 Organisations of any size with employee benefit
plans of different types, including:
- pension schemes
- death in service scheme
- employee share ownership plan
- education, training, medical or
unemployment plans
4 Financially sound organisations
4 Local, national and multinational companies
•
•
Pension schemes which are being assessed for
acceptance, or have been accepted, into the
Pension Protection Fund
Organisations who are financially poor and that
have significant pension deficits
Why Choose Chubb?
4 Unique and broad covers. Pension trustee liability policies will often only cover claims against trustees.
The Chubb policy covers scheme and plan trustees, plus the sponsoring company, as well as corporate
trustees and a whole range of additional insureds. The Chubb policy is one of the broadest policy
wordings available, and provides comprehensive protection in an increasingly complex and perilous liability
environment
4 Expertise. The Chubb Group of Insurance Companies has more than 30 years of pension scheme liability
insurance experience
4 All risks policy with no warranties or basis of contract clauses.
4 Highest AM Best rating. This indicates Chubb’s financial strength and long-term ability to pay claims
4 Award winning claims service. Chubb’s claims team is consistently acknowledged as the best in
the market
Key Selling Points
Cover/ Service Benefit Cover for wrongful acts during the
winding-up of a plan
4 It is becoming increasingly common for sponsoring employers to change their
employees’ pension provision, including winding up schemes. Unlike many other
insurers, Chubb provides cover during the winding-up period, ensuring your client
is protected from start to finish.
Cover for missing beneficiary claims
4 Many insurers provide an exclusion in respect of claims by missing beneficiaries.
Chubb recognises this is a common and critical exposure and provides cover as
part of the standard policy offering.
Cover for auto enrolment exposure
4 Many insurers do not provide cover for the actual breaches in the legislation.
The duty to enrol employees into a pension scheme of some sort is not a duty,
breach of which would be covered by a standard policy. The Automatic Enrolment
Provisions do not create a statutory duty to the employees. Therefore, if an insured
organisation breaches the provisions, employees cannot sue for the breach.
Chubb provides this cover as standard.
No warranties or basis of contract
clauses
4 Chubb has not had these for many years. This gives greater peace of mind to a
client, knowing upfront that there are no basis clauses or warranties that may trip
them up whilst making a claim.
Cover for emergency defence costs
4 Unlike many insurers, Chubb allows emergency defence costs to be incurred
without consent. It enables the client to proceed where, due to the emergency,
they cannot request immediate approval from Chubb.
Cover for civil fines and penalties
imposed by the Pensions Regulator
and Pensions Ombudsman
4 Increased inspection by regulators has led to an increase in fines and civil
penalties. Chubb’s policy will ensure your client is covered against such payments.
Cover for media costs
4 Chubb’s policy will cover the costs of a public relations consultant to work with
the insured and publish the successful outcome of a claim. This added feature can
potentially offset any damage to your client’s reputation.
Cover for court attendance and staff
disruption
4 Chubb offers compensation for staff time attending court and lawyer interviews,
payable directly to the policyholder.
Loss minimisation service (“ForeSight
by Chubb”)
4 Chubb aims to prevent a loss before it happens. ForeSight by Chubb is a loss
minimisation service with access to a leading law firm (subject to time limits).
Case Studies
Error in administration After taking professional advice, the trustees moved investments
in an attempt to enhance returns. They were also trying to
reduce investment risk, but later, independent, legal advice
concluded that the investments were high risk, insecure and
unwise. Subsequent losses, along with exit costs incurred, led to
suggestions of negligence on the trustees’ part.
Alleged poor investment strategy A scheme member left her employers, at which point she
became a deferred member of their pension scheme. The
scheme trustees advised her to transfer her value in the scheme
to an additional voluntary contribution fund. They said that this
would ensure that her annual pension at normal retirement age
would be higher. But it transpired that she should have stayed
in the scheme as a deferred member. Some years later, she
noticed the shortfall in her benefits. The same advice had also
been provided to other scheme members.
The Chubb Advantage Lawyers were instructed to investigate and counter the
suggestions. Because of our experience in these types of
claims we were able to understand the issues and confirm
coverage at an early stage.
Subsequent legal defence costs and damages exceeded
£1,000,000.
The Chubb Advantage Under some market contracts, only the claims against
the trustees would be covered. Many grievances are
not personalised against the trustees and will target the
company which provides the benefit plan. In this case, the
sponsoring employer was targeted along with the trustees
but the breadth of the policy led to all of the defence costs
and settlements of over £250,000 falling for cover under
the policy.
Contribution claim A trustee company issued a claim against their adviser alleging
that they failed to properly advise on the financial impact on the
plan of granting early retirement without actuarial reduction. The
trustee asserted that, had it received the relevant advice, it would
not have consented to further early retirements and would have
withdrawn consent to those applications made. The adviser
stated that such advice was provided to a director of the trustee
company and it was assumed that the advice was provided to
the other trustees. The adviser issued a part 20 contribution
claim against the director of the trustee company.
The Chubb Advantage Because of the broad nature of the definition of who is
insured under the Chubb policy, coverage was confirmed
for the claim. Subsequent defence costs incurred of over
£300,000 were paid under the policy.
Also available
Chubb has a broad package portfolio that can be combined with pension scheme and benefit plan insurance including:
• Employment practices liability
• Directors and officers liability
• Crime insurance
• Corporate legal liability
• Kidnap, ransom and extortion expenses
Chubb also offers comprehensive commercial and accident and health cover
Contact us
For more information or to obtain a quote please call your local underwriting or sales contact.
For all contacts, visit www.chubb.com/uk/marketinglibrary/contact
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CHUBB INSURANCE COMPANY OF EUROPE SE, a European company incorporated in England and Wales and registered under Company Number SE13.
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Registered Offices: 106 Fenchurch Street, London EC3M 5NB, England.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.
© Chubb Insurance Company of Europe SE 2013
F11 12/13