• The explosive growth in the hedge fund industry signifying competition for capital, coupled with consumer expectations of superior performance and insistence on scrupulous adherence to good faith and fiduciary duty, have created additional sources of exposure for hedge fund professionals.
• Institutional Interest Growing. Favorable publicity and need for returns not linked to market moves has increased the flow of institutional and pension money into hedge funds, giving rise to more accountability and requirements for professional liability insurance.
• Downside Risk Exposures. It is important for financial services professionals to be cognizant of downside risks. While the bulls are running, even underperformers are relatively immune to risk. But beware of the bear. If the market flattens or dives, below-par players will come under scrutiny and lawsuits will multiply. "The increased number of client and assets under management, coupled with the possibility of a constantly fluctuating market, translates into much greater liability exposure for these organizations and their professionals.", states Tony Giacco, VP, Underwriting for Executive Risk.
• More opportunity and change presents more exposures to lawsuits. The winds of change have reshaped the financial services industry, bringing prosperity and increased potential liability from a number of directions: diversification of services, consolidating organizations, increased regulation and increased number of investors. Hedge funds can be sued by their customers for errors & omissions and their members for director and officers liability, by their employees for employment related claims and pension fiduciary liability.

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