SYSC 13.10 Insurance

Whilst a firm may take out insurance with the aim of reducing the monetary impact of operational risk events, non-monetary impacts may remain (including impact on the firm's reputation). A firm should not assume that insurance alone can replace robust systems and controls.

When considering utilising insurance, a firm should consider:

1. (1)

   the time taken for the insurer to pay claims (including the potential time taken in disputing cover) and the firm's funding of operations whilst awaiting payment of claims;

2. (2)

   the financial strength of the insurer, which may determine its ability to pay claims, particularly where large or numerous small claims are made at the same time; and

3. (3)

   the effect of any limiting conditions and exclusion clauses that may restrict cover to a small number of specific operational losses and may exclude larger or hard to quantify indirect losses (such as lost business or reputational costs).