1. Forms
2. MP
3. MP-00-04

What the Form Is

The MP 00 04 Financial Institutions Executive Liability Coverage Form is an insurance policy form developed by ISO (Insurance Services Office) that provides executive liability coverage, often referred to as Directors and Officers (D&O) liability insurance, specifically for financial institutions. This coverage is provided on a claims-made basis, meaning the policy covers claims first made against the insureds during the policy period or an extended reporting period, if applicable, for wrongful acts committed after the retroactive date stated in the policy. The form is designed to protect the personal assets of directors, officers, and other insured persons of a financial institution from losses resulting from allegations of wrongful acts committed in their managerial capacity.

Classes of Business It Applies To

This form is specifically designed for various types of financial institutions. Real-world examples include:

• Banks (commercial banks, savings banks)
• Credit unions
• Savings and loan associations
• Insurance companies (although some may have highly specialized forms)
• Investment firms and asset managers
• Other financial services companies

Essentially, any organization engaged in financial activities where its directors and officers face liability exposures related to their management and oversight responsibilities could be eligible for this type of coverage.

Special Considerations

• Claims-Made Basis: This is a critical feature. Coverage is triggered when a claim is first made, not when the wrongful act occurred (though the wrongful act must typically occur after the retroactive date). This necessitates careful attention to policy renewal and the purchase of extended reporting periods ("tail coverage") if the policy is cancelled or non-renewed.
• Retroactive Date: The policy will specify a retroactive date. Wrongful acts occurring before this date are generally not covered.
• Defense Costs: Often, defense costs are included within the limit of liability, meaning that significant legal expenses can erode the total amount available to pay settlements or judgments.
• Common Policy Conditions: This form is typically used in conjunction with MP 00 03 Common Policy Conditions, which outlines general terms and conditions applicable to the policy.
• Cancellation Provisions: The MP 00 04 form itself may not contain cancellation provisions; these are typically addressed in the Common Policy Conditions (MP 00 03) or other amendatory endorsements.
• Exclusions: The policy will contain various exclusions, such as for personal profit or advantage, illegal acts, prior acts, and claims covered under other insurance policies.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters will scrutinize the financial health and stability of the institution, its corporate governance practices, internal controls, regulatory compliance history, litigation history, and the experience and qualifications of its management team. The specific services offered by the financial institution also impact its risk profile.
• Pricing: Premiums are influenced by the institution's size (assets, revenue), risk profile, industry segment, limits of liability requested, retention amounts (deductibles), and past claims experience.
• Coverage Gaps: Agents should be aware of potential coverage gaps, such as those arising from a new retroactive date upon switching carriers, inadequate limits for the institution's exposure, or specific exclusions that might impact the institution's particular operations.
• Underwriting Guidelines: Underwriters will look for strong risk management practices within the financial institution. They may require detailed applications and financial statements. The regulatory environment for financial institutions is stringent, and compliance is a key underwriting concern.
• Market Conditions: The market for financial institution D&O can be cyclical, with pricing and availability fluctuating based on broader economic conditions and loss trends in the financial sector.