1. Forms
2. MP
3. MP-00-05

What the form is

The MP 00 05 Financial Institution Executive Liability and Entity Securities Liability Coverage Form is an insurance policy form developed by ISO (Insurance Services Office). It is designed to provide specialized liability coverage for financial institutions. This is a claims-made form, meaning coverage is triggered when a claim is made against the insured during the policy period or any applicable extended reporting period, for wrongful acts that occurred after the retroactive date and before the end of the policy period. The form combines two key types of coverage: Executive Liability (often referred to as Directors and Officers or D&O liability) for the wrongful acts of insured persons, and Entity Securities Liability, which covers the financial institution itself against securities claims.

Classes of business it applies to

This form is specifically tailored for financial institutions. This includes a range of businesses such as:

• Banks (commercial, savings)
• Credit unions
• Insurance companies
• Savings and loan associations
• Investment firms
• Other financial services companies

For example, if the directors of a bank are sued by shareholders for mismanagement leading to financial losses, the Executive Liability portion of this form would respond. If the bank itself is sued due to alleged misrepresentations in a stock offering, the Entity Securities Liability portion would be triggered.

Special considerations

• Claims-Made Basis: The claims-made nature of this form is a critical aspect. Insureds and brokers must pay close attention to the policy period, retroactive date, and provisions for extended reporting periods (ERPs or "tail coverage").
• Definition of Wrongful Act and Securities Claim: The specific definitions of "Wrongful Act," "Insured Person," and "Securities Claim" within the policy are paramount to understanding the scope of coverage.
• Combined Coverage: This form distinctively combines D&O-like coverage for individuals with entity coverage for securities claims, which is crucial for publicly traded financial institutions or those otherwise exposed to securities litigation.
• Common Policy Conditions: The MP 00 03 (Common Policy Conditions) form is typically attached and forms part of the overall policy.
• Regulatory Environment: Financial institutions operate in a highly regulated environment. This policy is designed to address liabilities that can arise from alleged failures to comply with various laws and regulations, though specific exclusions will apply.
• Exclusions: As with any insurance policy, there will be exclusions. Common exclusions in management liability policies can include illegal personal profit, prior acts (acts known before policy inception), and claims related to bankruptcy if the primary purpose is to benefit the creditors of the organization. Policies may contain no cancellation provisions themselves, relying on the Common Policy Conditions or other amendatory forms for such terms.

Key information for agents and underwriters

• Risk Assessment: Underwriting financial institutions requires a thorough analysis of their financial health, management experience and stability, regulatory compliance record, internal controls, history of litigation (especially securities-related), and the nature of their financial products and services.
• Pricing: Premiums will be influenced by the institution's size, asset base, type of financial services offered, public or private status, claims history, and the limits of liability and retention amounts chosen.
• Coverage Gaps: Agents should assess potential coverage gaps. For instance, while this form covers executive and entity securities liability, other exposures like employment practices liability, fiduciary liability (though MP 00 07 can be added ), and cyber liability would typically require separate policies or endorsements.
• Comparison to Other Forms: It's important to understand how MP 00 05 differs from other management protection forms. For example, MP 00 04 provides executive liability for financial institutions but lacks the specific Entity Securities Liability coverage found in MP 00 05. MP 00 02 provides Executive Liability and Entity Securities Liability but is not specifically tailored for financial institutions.
• Endorsements: A variety of endorsements may be available or required to tailor the coverage, including those related to specific state requirements, exclusions (e.g., for specific pending litigation), or enhancements (e.g., extended reporting periods). The co-insurance endorsement MP 03 02 may also be relevant as it is designed for use with MP 00 02 and MP 00 05.
• Market Conditions: The market for financial institution D&O and entity liability can be cyclical. Agents should stay informed about current market conditions, insurer appetite, and pricing trends.