While the decision as to what limit of liability to purchase is dependent on a firm’s own internal view of their risk exposures, we are constantly researching the limits purchased by the asset management industry in order to be able to provide a guideline based on peer review.
Additionally, the AIFMD has provided a guideline as to how much professional indemnity cover a firm should purchase – this being 0.7% of the total asset value of the AIF(s) for individual claims and 0.9% of the total asset value of the AIF(s) in aggregate per year.
At the lower end of the scale £5m limits is generally seen as the de minimis level of cover but as a manager grows 1% of AUM is a useful guide in terms of deciding how much cover to buy up to a level of around £10bn AUM. When managing in excess of £10bn the decision of whether to buy more cover depends on many factors including strategy, demographic of AUM and director risk perception.
