In recent years, the world of investments and real estate has attracted more and more investors looking for profitable investment opportunities for their savings, aiming to secure their future and that of their families. At the same time, more and more funds and various investment entities, such as entrepreneurial companies, real estate, and hedge funds, are offering them Diverse investments besides the capital market, among them: real estate assets all over the world, infrastructures, green investments, and more.
To understand the significant boom in the field of investments, it is enough to look at the data of the company Preqin Global Alternatives, according to which, at the end of 2021, the total value of the alternative investment market was more than 13 trillion dollars, and in 2026 the amount will almost double and reach about 23 trillion dollars.
Although the increasing demand for finding profitable investment avenues and the various factors involved in the process, including investors, entrepreneurs, brokers, lawyers, and other professionals, also increase the risks and responsibilities imposed on the various investment and hedging funds.
In this dynamic and intense world, more and more investment entities realize that they must hedge and reduce the risks they take to maximize profits optimally.
For this purpose, professional insurance was created that provides alternative investment funds, hedge funds, and real estate funds an answer against various legal claims and exposures that they may face as part of their activities.
What Types of Insurance Exist Today for These Investment Entities?
Directors’ and Officers’ Liability Insurance – As an investment body that is sometimes responsible for managing investments to the extent of millions of dollars and more, the real estate funds, hedging, and alternative investments include quite a few managers, directors, and senior officials, who have to navigate and make complex decisions every day. Within this reality, they may be exposed to personal lawsuits from investors, entrepreneurs, and professionals, who may claim negligent conduct on their part. At the same time, employees may also file a lawsuit against them for illegal conduct within the framework of the employee-employer relationship. To reduce these risks and to finance the various legal proceedings, the obligation of compensation was established as part of the judgment or settlement agreement, and this insurance was created. Schaaf covers various regulatory investigations, which are opened against the directors and officers.
Errors and Omissions Insurance – Covers the entrepreneurial, real estate, and hedge companies themselves against various negligence claims filed by third parties, including investors, entrepreneurs, professionals, etc. Professional liability insurance in the case of investment bodies is important and critical since, in the framework of investment management, we will often witness various parties who will not be satisfied with the decisions and conduct of the investment body, which cause them significant financial losses, and will want to sue for professional negligence. Professional liability insurance comes to protect the various companies and funds and indemnifies them in case of a lawsuit, investigation, damage to the good name, etc.
Cyber Insurance – LtRenault, in recent years, we are witnessing more and more cyber attacks, during which companies and funds may be exposed to the dangers of stealing information or sums of money or requesting the payment of a ransom. The large amount of information held today by those investment entities, both regarding investors, entrepreneurs, and investments, also increases the risk of lawsuits from third parties in the event of information leakage. Cyber insurance is designed to give investment entities a comprehensive umbrella, which protects them both from damages caused due to the hack and the management of the cyber incident and against various lawsuits filed against them by various parties.
Crime Insurance – The investment bodies are entrusted with significant investment funds, which reach a total of trillions of dollars and more. The management of these funds also increases the risk of embezzlement by employees in the funds and securities they hold. Crime insurance provides investment entities with indemnification for theft, and it should be noted that it also includes electronic embezzlement.