Property exposures are primarily from fire due to the electrical wiring for computers, printers and other electronic office equipment. All wiring must meet current codes and be adequate for the bank’s operations. Some equipment will have circuitry easily damaged from smoke, water and heat, which will cause a total loss even with a small fire. The building and its contents can be damaged during robberies, burglaries, and vandalism. Appropriate security measures should be taken, including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department. Since regulations require that customers have access to their monies on deposit at all times, disaster planning is vital. Extra expense coverage should be considered as the bank must continue operations after a loss.

Crime exposures are primarily from employee dishonesty, either from the theft of cash or from improper transfer of funds held for customers. Money and securities can be stolen during armed robbery and safe burglary. Banks need a Financial Institutions Bond to cover these exposures. Background checks should be conducted for anyone who will have access to the accounts. There must be regular monitoring and auditing of the books by outside auditors to prevent and identify problems. All employees must take at least one continuous week of vacation a year. Monies kept in tellers’ drawers should be moved regularly to the vault to prevent a large buildup of cash available to thieves. Safes, vaults, theft-proof cashier cages, guards, watchpersons, and alarms are needed to protect money. Controls and programming to prevent computer fraud should be reviewed. Extortion is another growing concern due to the high value of assets held by banks.

Inland marine exposure comes from accounts receivable, computers and valuable papers and records. Off-premises coverage should be considered for kiosks and self-standing cash machines in other stores. Backup copies of all records, including computer records, should be made and stored off premises for ease of restoration in the event of a loss.

Occupiers’ Liability exposure comes from slips and falls due to public access to the premises. As customer safety and security are very important, the bank may have one or more armed security guards on duty while it is open. All employees must be trained in proper procedures during a holdup to minimize the possibility of violence to or kidnap of customers. Floors, stairs, and elevators need to be in good condition, with steps and uneven floor surfaces prominently marked. Emergency lighting, well-marked exits, and proper egress, as well as interior and exterior security while going to and from the premises, are important. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. There should be security in the parking lot equal to or better than the surrounding premises. If the business is open after dark, such as for access to ATM machines or deposit boxes, lighting must be adequate.

Personal injury exposure arises from breaches of customers’ privacy and confidentiality of their financial records and the apprehension of suspected robbers. The use of closed-circuit camera systems prevents such incidents from evolving into a “he said she said” situation. Employees must be trained to handle such situations properly.

Product liability exposure is very low as financial products sold to customers are intangible. There may be some minor exposure if the bank sells items like tee shirts or advertising novelties or offers small gifts to customers as a reward for banking with them.

Fiduciary liability exposure is significant because banks often act as trustees for clients. Appropriate surety bonds should be in place along with a fiduciary liability policy for potential errors and omissions.

Errors and omissions exposure by accountants and auditors can cause significant loss. There must be checks and balances in place to quickly catch and fix errors that are made. The background and training of all professional-level employees must be thorough and continual. Monitoring is a must.

Directors’ and officers’ exposure can be substantial due to competing priorities of numerous stakeholders such as stockholders, bondholders, depositors, employees, and regulators. Directors and officers are more likely to be sued for results of their decisions in times of economic downturn and well-publicized excesses within the financial services industry. Banks may offer investment advisory services, estate handling, and management of individual and corporate trusts, employee pension funds, escrow funds and other financial activities. Directors and officers can be sued if funds from any of these are mismanaged.
Officers must be thoroughly knowledgeable about the banking business, able to operate competitively while maintaining profitability, and able to oversee ongoing operations effectively. Directors should include representation from a wide variety of business interests with no conflicts of interest.

Automobile exposures may be limited to hired and Non-owned for employees running errands. If the company provides vehicles to officers or key employees, policies should be in place for personal and permitted use of the vehicles. Any driver must have a valid driver’s license and MVRs must be run regularly. Ongoing maintenance should be documented.

Workers compensation exposures are moderate due to the possibility of injury or death to guards, tellers, and managers during an armed robbery. Tellers should be separated from customers by barriers such as high counters. Those working with customers at walk-up or drive-in windows should be protected by bulletproof glass enclosures. Cashiers and other clerical employees are exposed to repetitive motion and carpal tunnel syndrome. All workstations should be ergonomically designed to reduce the chance of such injuries.