This insurance, so named because the word “blanket” indicates that the insurance covers the conduct of all the bank’s employees without listing them individually, dates back to 1911.
Bankers blanket bond insurance (BBB insurance) was pre-dated by a fidelity bond available to banks for named employees and providing cover for losses arising from hold-ups or similar events. Rather quaintly the original policy had two sections, one for “night burglary” another for “daylight robbery”.
Increasingly the cover is now being renamed as Financial Institutions Bond insurance because the product is underwritten for financial institutions generally, including insurers.
BBB insurance does not insure a bank for its commercial risks, protect the bank if the borrower becomes insolvent, nor make the insurer a guarantor of the bank’s customer bad debts.
The primary cover under BBB insurance relates to honesty or dishonesty of the bank’s employees. The policy usually requires that the dishonest acts of employees be committed with the manifest intention to cause the bank to sustain a loss or to make an improper gain for themselves.
It is typically a long-serving and trusted employee who is responsible for the loss. Claims often involve complex forensic evidence coupled with legal questions of policy interpretation.
A BBB policy is a discovery policy only, applying to losses discovered during the policy period with the date of discovery fixing the applicable policy year.