Electronic & Computer Crime Insurance


The increasing usage of sophisticated computer and payments systems by financial institutions has created new and complicated exposures to criminal loss.

Funds-transfer and computer activities represent exposures to fraud and theft by employees, customers, service contractors and many others. Fortunately losses in this category - not covered by the various Bankers' Blanket Bonds - have not been significant to date. The potential for a huge increase in such losses, however, is certainly present.

Increased reliance on automated systems has led both bankers and insurers to re-examine insurance coverage. They found that while the Bankers' Blanket Bond would cover losses associated with employee fraud in the bank's automated systems, it did not cover fraud perpetrated by third parties using telecommunications links connected to the computer systems.

Underwriters at Lloyd's were the first to design a policy to cover the risks associated with the use of computers and modern telecommunications systems by financial institutions. Similar coverage is now offered by USA insurers and takes the form of either a separate policy or a "rider" to the Bankers' Blanket Bond.

The policy consists of the following vital components:

Computer Systems
Insured's Service Bureau Operations
Electronic Computer Instructions
Electronic Data
Computer Virus Cover
Electronic Communications
Electronic Transmissions
Electronic Securities
Forged Telefacsimile
Voice-Initiated Transfers

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Computer Systems
Coverage in respect of losses sustained through acting upon data which has been fraudulently input on the computer system or fraudulently modified. This is intended for the coverage of electronic or computer use in the following areas:
  • The Insured' s own computer systems.
  • A customer communication system.
  • A service bureau' s computer system.
  • Electronic funds transfer system.
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Insured's Service Bureau Operations
Coverage in respect of the Insured' s legal liability whilst acting as a service bureau; covering the input or modification or destruction of electronic data by a person or persons with the intent of causing the Insured or their customer to sustain a financial loss for which the Insured will be legally liable.
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Electronic Computer Instructions
Protection for losses arising from electronic instructions which have either been fraudulently prepared or fraudulently modified.
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Electronic Data
This section of coverage offers protection against risks of physical loss or damage to electronic data, similar to the Premises and Transit clauses of the Bankers' Blanket Bond. Providing the insured with coverage in respect of the malicious destruction or electronic data (discs, magnetic tapes or any other media on which data may be stored) while on the premises of the Insured or while in transit.
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Computer Virus Cover
Coverage provided in this respect is extremely restricted and the insured must prove beyond doubt the malicious introduction of such a virus..
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Electronic Communications
Protection against financial loss sustained as a result of the insured acting upon certain types of funds transfer instructions, which have been altered in transmission or which purport to have come from a customer, automated clearing house or another financial institution, but in fact do not.
Means of transmission:
  • Electronic communications system
  • By tested telex or similar means.
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Electronic Transmissions
Legal liability protection for losses to customers, financial institutions or an Automated Clearing House arising from electronic instructions which were alleged to be sent by the insured but which were not, or were fraudulently altered during transit.
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Electronic Securities
Coverage in respect of loss incurred when a central depository has acted upon electronic instructions which purportedly believed to have been sent by the insured and which in practice were not, or were modified fraudulently during physical transit.
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Forged Telefacsimile
A very large proportion of instructions initiating electronic funds transfer (EFT) payments enter financial institutions via the telephone or facsimile message, underlining the importance of this form of coverage. Protection is provided in respect of losses sustained due to the fraudulent transmission of facsimile messages, purporting to have come from a customer, another office of the insured or from another financial institution, being sent without permission and a forged signature.
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Voice-Initiated Transfers
Protection for voice initiated funds transfer instructions. It should be noted that underwriters will require that a structure of specific minimum standards is in place with regard to procedure before providing coverage in this respect.
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Edward Howard Insurance Services Ltd. is authorised and regulated by the Financial Services Authority. FSA Reference Number 306921 Registered in England. Company No. 3520697