Amber Partners Ltd, a consultancy specialising in hedge fund operational risk that has pioneered the certification of hedge funds for operational risk, said yesterday that some UK and US insurers to the hedge fund industry are offering premium discounts on Directors & Officers, Errors & Omissions and Crime Coverage insurance to Amber certified funds. Amber Partners produces comprehensive due diligence reports on individual funds, giving investors independent information on fund structure and controls.
“We are delighted that, as a result of our collaboration with Amber Partners, Aon has obtained materially reduced premiums from the Lloyd’s insurance market in recognition of the direct correlation between superior operational risk management and improved insurance risk,” says Richard Ellis, Associate Director of Aon Limited.
Andrew S. Fielding, Managing Director of ASF Financial said he believes that Amber Partners’ certification process is beneficial to insurers when evaluating the operational risk exposures of hedge funds and fund managers. “In turn, this should help the ASF/Willis joint venture achieve competitive Executive Risk insurance premiums for our clients in this sector,” he added.
Amber says insurance underwriters have responded with enthusiasm to Amber Certifications. “The specialist accreditation services combined with the knowledge and experience of Amber Partners provides an invaluable indication of the levels of risk management employed in hedge funds and the fund management sector,” says Steven Moss of Brit Insurance Limited. “As a committed lead insurer in this niche area, Brit is increasingly using the information and risk identification services undertaken by Amber Partners as a fundamental rating factor in determining the extent and cost of coverage offered through Investment Management insurance products.”
“We felt so strongly about Amber’s certification process that we organized a meeting with every US underwriter of Hedge Fund Management Liability to meet with Reiko and her team,” adds Richard Maloy, CEO of Maloy Risk Services in New York, a boutique insurance broker for hedge funds. “Since Amber Certified funds will be looked at more favorably than funds that are not certified, it is crucial for our client base to go through this process.”
Amber expects approximately 30 funds to achieve certified status by summer 2006.
Amber Partners introduced its operational risk certifications in November last year. It conducts comprehensive back office and fund due diligence, providing certification to funds that meet a benchmark of operational quality. Amber certified funds are industry leaders, have a commitment to operational best practice and have responded to investor requirements for greater operational transparency.
Amber Partners was formed by Reiko Nahum, and is supported by a consortium of shareholders including Bear Stearns, BNP Paribas, certain principals of Vega, Anchor Asset Management and Alexandra Fund Management, a wholly-owned subsidiary of Temasek Holdings, Singapore.