June, 1996
Crime Coverage for Financial Institutions
Summary: Because of the size and nature of the risks involved, financial institutions do not insure their crime exposures with the same standard forms employed by other types of commercial insureds. Instead, financial institutions use financial institution “bonds” that offer a multi-coverage approach to employee dishonesty and other crime exposures faced by this class of insureds. The basic coverages available under the financial institution bond are fidelity (employee dishonesty), on premises, in transit, counterfeit currency, forgery or alteration (optional), and securities (optional). The discussion reviews the background and eligibility for the various types of financial institution bonds.
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The term “blanket” remained part of the language of the financial institutions insuring industry, particularly in the title of various forms, such as “bankers blanket bond” or “stockbrokers blanket bond.” As newer versions of the policies are introduced, the word blanket is being phased out because of its modern connotation of “all-encompassing,” rather than “multi-line.” The most common policy, Standard Form No. 24, is called the “financial institution bond” rather than the “bankers blanket bond.”
Standard financial institution bonds are under the jurisdiction of the Surety Association of America (SAA). The SAA is a bureau that sets rates and administers standard forms much in the same manner that Insurance Services Office (ISO) operates in the property-casualty field. In addition, the SAA has responsibility for coverage forms A (employee dishonesty) and B (forgery and alteration) in the 1986 standard commercial crime program.