Civil Money Penalty Insurance

Since the FDIC came out with their October 2013 letter clarifying/trashing the use of insurance to protect bank directors and officers from civil money penalties there has been a great deal of heat generated by discussion.  Not much light – lots of heat.

About two years ago I saw the whole thing coming and started telling my bank clients to remove CMP coverage from their directors’ and officers’ insurance. Since then I have been looking for an insurance solution that would meet the risk management needs of directors and officers and not piss off the FDIC.

For the first time, I think someone has come up with an insurance policy that solves the problem.

AHT Insurance of New Jersey is now offering a policy that individual directors can buy to be protected against CMP. Here are some policy highlights as given to me by Dennis Gustafson of AHT:

  • Pricing ranges from $735 for a $50,000 limit to $3,400 for a $250,000 limit, not inclusive of applicable state surplus lines taxes/fees. All options include a $0 deductible.
  • The process must be facilitated by the individual only. He or she will complete the application, pay the premium, and the policy will be issued directly to their home address or personal e-mail address. Additionally, the named insured on the policy will be the individual, and cover them for all of the bank boards they sit on.
  • Policy covers the penalty only and does not include coverage for defense costs (defense costs can be covered under the Bank’s D&O Insurance).

I know there are several other agents/brokers/insurers working on this. I have not seen a public announcement that they are ready to issue policies.  One insurer is almost ready to go – the policy will be tied to the D&O policy – a huge mistake I think.

Dennis tells me he is ready to quote and bind coverage. I’m pleased that risk conscious directors and officers now have an insurance option to the exposure of civil money penalties.

Dennis Gustafson
Principal & Financial Institutions Practice Leader
AHT Insurance
60 Park Place, Suite 402
Newark, NJ 07102



(Note: I have no connection to AHT and no financial interest in this product. I never sell insurance and never accept fees or commissions from insurance companies or agents. This is not an endorsement of the product – though I do think it is interesting.)