From Mike Taylor-West, La Playa Private Client & Marine
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Family office and trust professionals must deliver robust protection for the complex asset portfolios (and liabilities) of their clients. As clients' lifestyles are increasingly fluid across territories and asset classes, it's absolutely key that you have in place insurance arrangements that will respond when you need them to. What you don't want is a "chocolate teapot" policy that just goes into meltdown when you make a claim.
The spectre of under-insurance, particularly in property, haunts trust managers - with good reason: there's a clear duty to understand exactly how a loss could affect the beneficiaries and have in place the right cover at the right levels. Asset protection is one of the key drivers for creating trusts - so it's mission-critical for them to have the right insurance coverage in place, carefully structured to support that goal.
Sometimes entities wind up being inadequately insured, inappropriately insured or (usually inadvertently) not insured at all. This often occurs because where trusts, SPV's and insurance intersect, it can be a no-man's land where legal and wealth management professionals simply don't receive the sophisticated insurance input they need.
And quite apart from the impact of a refused claim on clients, there's the impact on your own work and business of a time-consuming contentious negotiation, or worse an Error or Omission.
UNDER-INSURANCE If an asset is under-insured (perhaps due to lack of a recent reinstatement assessment), the insurer might apply an 'average clause' to claims, leaving the client out of pocket or in litigation. This in turn could mean a professional indemnity claim for you. Listed properties, in particular, demand periodic re-assessments due to the legal obligations of ownership.
BREXIT It's hard to predict the impact of Brexit on the property under your charge - but property insurance requirements span across multiple jurisdictions. You need to work with an insurance broker who is prepared for Brexit and has arrangements in place to continue to provide cover under all eventualities.
GAPS IN COVER FOR TERRORISM Properties owned by a holding company or in trust (where the Trust beneficiary resides at the property) are now considered commercial enterprises for insurance purposes and therefore not automatically covered for Terrorism. The rules of Pool Re (brought in to shield the economy from the financial impact of terrorist attacks) mean that UK terrorism cover for domestic property in trust must be purchased separately, as for a commercial business. Some insurance for property in trust has seen 30% premium rises (especially in high terrorism risk zones such as central and west London).
MOVING ASSETS If your client has art on their yacht and/or wine collections moving between their properties, who is protecting these passion assets and are they fully covered? Are the right customs declarations in place? Could there be gaps in cover - where marine insurers don't have the expertise to fully understand the art risk; and art insurers are not comfortable insuring such significant values of art afloat? It's important to take advice from a broker who's used to finding solutions for international high net worth clients.
CLIENTS MIGRATING INTO THE UK You'll want to help create a soft landing for clients moving to the UK for the first time - as regards their insurance as well as a multitude of other personal service needs. UK insurance requirements may be a new concept for them, and it can be helpful to have some information in Russian or Mandarin, for example. They'll also need an insurance adviser who can connect them with renovation insurance advice, physical and cyber security, collectibles valuations, car purchasing, wine, international private medical and other estates services.
PRIVATE AIRCRAFT If your principal owns and operates a private aircraft, the insurance portfolio needs some serious expertise. Unless your insurance broker has in-house aviation specialists, they'll need to sub-broke this (or indeed may decline to deal with it at all).
These measures will help you avoid the "chocolate teapot" scenario, where you've paid good money for insurance that ultimately goes into meltdown when you make a claim.
An independent specialist broker based in London, Cambridge, Dublin and New York, La Playa delivers global capability with boutique style service for high net worth clients. Our aim is to make the insurance aspect of trust and family office managers' work easy. We can pull together all of your clients' assets into a well-structured portfolio, support you with risk and security advice, and protect you from time-consuming claims administration to give real peace of mind. No chocolate teapots!
La Playa Private Client: Insurance with Intelligence®
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For more information contact Mike Taylor-West ACII, Director T: +44 (0) 7500 109737
E: mike.taylorwest@laplayainsurance.com
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