Management Companies: Insurance as a New Strategic Tool in a Tightening Regulatory Environment

An Industry Facing Unprecedented Regulatory Inflation

For several years, management companies have been confronted with increasingly dense regulatory frameworks. A clear example from the past year is the implementation of the European regulation known as DORA. This regulation requires financial entities to implement a comprehensive digital operational resilience framework: regular testing, strict oversight of critical service providers, and reinforced IT incident management.

For executive teams, regulatory pressure is twofold: ensuring full compliance while maintaining high levels of performance and operational security. A single failure, even minor, can now trigger client claims, administrative sanctions against executives, or lasting reputational damage for the company.

Executives on the Front Line: Heightened Personal Exposure

Supervisory authorities are tightening expectations regarding senior management. Governance, operational decisions, traceability of strategic choices—everything is now scrutinized. This evolution inevitably increases their personal exposure. Cybersecurity is a key area of concern. Under DORA, managing an IT incident or the failure of an external provider is no longer a purely technical matter. It becomes a governance issue that can directly implicate executives.

In this environment, the challenge is no longer simply to comply, but to be able to demonstrate, with documented evidence, the robustness of the measures implemented.

Insurance as a Cornerstone of Risk Management

Faced with multifaceted risks, insurance is no longer just a financial transfer mechanism. It has become a structuring tool for governance strategy. Two coverages are essential:

1. Professional Indemnity (PI) : Essential for protecting the company in the event of errors, omissions, or failures in asset management or investment advice. In such a dense regulatory landscape, the likelihood of disputes rises automatically. 

2. Directors & Officers Liability (D\&O) : This coverage protects executives in case of personal liability: administrative investigations, alleged breaches, disputed decisions. In a sector with increasing supervisory pressure, this protection is strongly recommended.

The Strategic Role of Specialized Insurers

Given the technicality of risks faced by management companies, a high level of expertise is required and it is worth seeking out an insurer with expertise in the financial institutions sector. 

Their added value lies in:

• a deep understanding of portfolio management company (PMC) activities,
• the ability to structure policies tailored to various management models (third‑party management, private equity, etc.),
• enhanced support in the event of claims or regulatory investigations.

For PMCs, relying on a specialist partner not only reduces risk exposure but also strengthens client and investor confidence—while enabling the company to continue operations with greater peace of mind during the handling of a claim or investigation.

Towards Insurance Integrated Into Corporate Governance

The rise of regulatory requirements is profoundly reshaping the role of insurance in asset management. Far from being a simple financial safeguard, insurance has become a governance tool, a strategic lever, and a driver of resilience.

In a context where executive responsibility is increasing and operational risks are becoming more complex, PMCs have every interest in integrating their insurance partners at the heart of their risk‑management framework—a shift that is already well underway and set to accelerate.