It is an annually renewable policy purchased by the company on behalf of designated individuals with the aggregate policy limit being divided into ring fenced and dedicated limits for each individual. It both covers pre-enforcement dealings with regulators and works as a policy of last resort in the event of a claim.*
*-Any steps ultimately undertaken should also be determined in association with a company’s governance framework and protocols, maintaining compliant co-operation with regulators at all times.
Why is LEAP needed by senior managers?
LEAP is aimed primarily at executive and non-executive directors and other senior individuals in companies subject to financial services regulation although it covers any regulatory or investigatory authorities in the world.
Given the new regulatory focus on personal accountability, individual board members are increasingly likely to need access to independent legal advice in dealings with regulators where the potential exists for a misalignment or conflict of interest between the company and them. D&O policies do not typically provide such protection in the absence of a claim or relevant investigation. The extent to which (and terms on which) company indemnities can plug this gap is also often variable, discretionary and uncertain.
What does LEAP do?
LEAP provides access to insurance funds to pay for legal advice for each designated individual in the performance of his or her employed or appointed capacity and covers among other things:
- Contentious aspects of the regulatory approval process for the individual who is subject to financial services regulation;
- Attestations and other personal sign off certification procedures with the regulators;
- Any other requests for cooperation, evidence or assistance made by any regulatory authorities anywhere in the world which are empowered to regulate or investigate the affairs or conduct of the company or individual.
How does LEAP work?
Senior individuals can access legal advice from lawyers of their choice. Importantly, it is the individual's own subjective assessment of the requirement for advice which triggers the cover. They can either seek approval from the company's general counsel, or company secretary (or similar) for access to the policy or alternatively pay a self-insured retention for direct access to the policy. Where the company indemnifies senior individuals for separate legal advice, the company can also claim reimbursement for these payments from insurers.