Sydney Firm Writes Largest Key Person Policy

A Sydney based financial planning company has written what is believed to be the largest-ever key person insurance policy in Australia, worth $60 million, but has questioned why more corporates are not insuring senior executives.

The policy, which covers a single high level executive of a global corporation entering the Australian market, was written by North Sydney firm, CSP, which specialises in advising corporations and individuals on investments and risk.

CSP chief executive, Lachlan St Clair, said the policy was issued within three weeks as the corporation involved had allocated resources to ensuring it could find the cover it required, with ANZ OnePath issuing the policy after it went to a tender among six insurers.

However St Clair said this was in contrast to local corporations and firms, particularly in the financial services sector, who are less engaged in seeking this type of cover.

…I am unsure why corporates in Australia are less engaged with this type of risk protection

“Given the precedents that exist where firms have failed to protect themselves I am unsure why corporates in Australia are less engaged with this type of risk protection. Perhaps they feel they have sufficient resources to cover the loss of a senior executive.”

St Clair said that events in financial services shows that when senior investment staff leave a financial services group there is usually an impact on stock prices or funds flow, which highlighted the need for risk protection around such events.

“These negative impacts happened when someone left an organization but the impacts would be the same or worse if someone died,” St Clair said.

He said failing to appropriately address corporate insurance issues – including key person insurance – meant some larger firms were neglecting their fiduciary duty to protect investors and were putting the firm and shareholders at risk.

“Big companies – particularly those with public boards – have a responsibility to shareholders and if they’re aware of risks and don’t put the necessary measures in place to protect against them, then their share prices will be affected if they lose a key player to death or disability,” St Clair said.

According to St Clair some groups perceive the task as too complex or too difficult to secure underwriting but he stated that with an awareness of the risk factors involved and a commitment to covering it via insurance policies can be written quickly.

“We were able to complete everything required – financials and medicals – within the three-week timeframe, finalising a policy on a Friday and issuing it on the following Monday,” St Clair said.

“The quick turnaround proves that when all parties – the management team, the financial planning team and the insurer – are committed to the same outcome, underwriting can take a matter of weeks, not months.”