Although it is most often called a financial institution bond, this form of insurance is a layer of protection for banks and other financial institutions against losses that occur through employee-related dishonesty, acts of burglary or robbery, and a number of other exposure caused by criminal activity. Even though there are regulations requiring all financial institutions to carry these bonds, the nature of who is covered can sometimes bring confusion.
The FI bonds are used to reimburse a bank or financial institution if an act of employee dishonestly occurs that brings gain to the involved employee. Therefore, it is the actual employees that are bonded. Even though it the employee itself that receives the coverage, the experts at Financial Guaranty Insurance Brokers, Inc. advise that both a parent company and all subsidiaries be included in the coverage by being specifically named. Without this documentation present, claims filed against the entity may be denied. Additionally, only employees without a prior criminal past related to financial crime are bondable.
While the FI bonds will cover situations of armed robbery, fraudulent funds transfers, or hacking scams, it will not cover acts of negligence or mistakes caused by failing to follow protocol. There are many risks facing financial institutions, and you need to be sure your coverage is comprehensive and will sustain your company against significant loss.