With rise in cyber attacks, bribery charges against officials, banks look to increase insurance cover

Faced with rising risks of cyber frauds and charges of bribery and corruption against senior officials, banks are ramping up their insurance cover in a big way, with some policies even crossing the ₹100-crore sum insured mark. And it’s not just the larger public sector and private lenders that are seeking adequate protection, rural and co-operative banks too are in talks for insurance against various risks.

According to insurers, with governance and regulatory problems surfacing in the last one year, banks, especially state-run lenders, have upped their cover for directors and officers’ (D&O) liability insurance as they want better protection with fewer exclusions.

“Earlier, banks were taking minuscule covers. There was very little awareness; most banks didn’t know how to claim them or understand the coverages. But, as we become more litigious, as the government action becomes so much more onerous and the onus on directors sometimes after they have left the job or retrospectively becomes huge, banks are looking to be adequately covered,” said Supriya Rathi, Promoter Director, Anand Rathi Insurance Brokers.

While traditionally such policies were taken for ₹5 crore to ₹10 crore, they are now seeking sums insured of at least 10 to 15 times more, with larger lenders even looking at over ₹100 crore.

Banks are also looking for more customised policies with fewer exclusions, and are seeking cover for lifetime protection of their directors even after they retire, said Rathi.

Similarly, they also want cover against allegations of discriminatory actions in the workplace, and bribery and corruption.

The development comes at a time when directors and officials of many public and private sector lenders are under scrutiny for decisions regarding sanctioning of loans.

“Earlier, some of the large PSU banks bought D&O policies for namesake without adequate coverage,” noted Manoj Kumar AS, Senior Vice-President, and Head, Liability Insurance, Global Insurance Brokers, adding that now D&O policy is becoming a must, given the way in which governance and regulatory disclosures are changing across the globe and shareholder activism is rising. “If there is any legal issue, to have adequate protection to protect themselves, such a policy is mandatory,” he said.

Cyber insurance

Concerns over cyber risks are emerging, especially after the ₹94-crore cyber attack on Pune-based Cosmos Cooperative Bank last August.

According to Rathi, apart from large commercial banks, even rural and cooperative banks are now in talks for policies against cyber attacks.

Since risk is omnipresent regardless of the size of the institution, “they know that they are vulnerable”, she said, adding that a number of cooperative and rural banks are now discussing such covers.

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