RIA Insurance Claims Skyrocket
From the desk of Jim Eccleston at Eccleston Law
A recent analysis by Golsan Scruggs reveals a staggering 231 percent increase in errors-and-omissions (E&O) liability claims among registered investment advisor (RIA) insurers. This surge, primarily attributed to the 2022 bond market crash and escalating cyber threats, has triggered substantial insurance payouts. Despite the spike in claims, RIA premiums have remained steady.
RIABiz reports that cybersecurity threats loom large, with cyber scammers employing increasingly sophisticated tactics, including voice manipulation, to deceive RIAs and clients alike. Despite efforts to bolster security measures, such as multi-factor authentication, RIAs continue to fall victim to social engineering and wire fraud schemes.
While claims have surged, insurers report that the majority of RIAs are adequately insured, largely due to custodial requirements mandating a minimum of $1 million in E&O coverage. Additionally, the cost of E&O insurance varies based on factors such as assets under management (AUM) and the composition of the RIA's portfolio. While smaller firms may secure coverage for as little as $2,000 to $2,500 annually, those with significant exposure to alternative investments may face higher premiums, reaching up to $10,000 per million of coverage.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law
