CEA raised concerns on Article 9 of AIFMD - professional indemnity issues
18 January 2011
CEA recommends that Article 9 remain as flexible as possible in order to prevent insurance market capacity for the cover of potential claims from being unduly hindered. This includes affording AIFMs the freedom to determine the scope of their cover, as well as any ongoing adjustments for that cover in the future.
The CEA has sent comments to the European Securities and Market Authority (ESMA) on issues related to professional indemnity insurance in the forthcoming EU Directive on alternative investment fund managers (AIFMs).
Though the CEA recognises that the goal behind Article 9 is to ensure there is adequate cover for losses arising from professional negligence, there is significant concern about the manner in which this article is being implemented. The few insurers available in this market, due to the difficulty in offering cover and in assessing the likely risks to arise, indicates that there will likely be an inadequate amount of insurance capacity to fulfil the demand for professional indemnity insurance that will be brought about by statutory compulsion.
The insurance industry strongly believes that sound supervision and adequate prudential requirements for AlFMs are key and should come into effect before considering any additional layers of protection through a professional indemnity insurance measure. Thus, while the CEA acknowledges that achieving the aforementioned objectives of the AIFM Directive may require revision of the existing liability system for AIFMs, it wishes to also take this opportunity to express its concerns about Article 9 and the negative impact it can have on both the insurance and investment sectors.
© CEA - Comité Européen des Assurances
