What is Banker's blanket bond?

A banker's blanket bond (BBB) is a fidelity bond purchased from an insurance broker that protects a bank against losses from various criminal acts carried out by employees. A banker’s blanket bond is also known as a blanket fidelity bond. A banker’s blanket bond is an insurance policy that provides coverage against the direct financial loss from forgery, cyber fraud, physical loss of or alteration to property, extortion, and employee dishonesty. The employee must have committed these fraudulent acts for personal gain for the company to make any claim against the bond. Banks and Financial Institutions recognize the risks associated with their operations and the exposures from within as well as external. It is therefore important that a risk transfer mechanism is set in place to safeguard against all the odds. The Banker’s Blanket Cover is purposely designed for the banks and financial institutions considering their unique needs for coverage. Bankers Blanket covers various “insuring clauses” to encompass various contingencies to suit specific needs. This means the bond does not cover the activities of employees who commit unethical transactions for the purpose of making a financial institution appear healthier. 

The blanket fidelity bond is classified as a first-party coverage since it covers the institution itself, not the account holders or shareholders. However, this bond is not to be taken as a form of credit insurance. A banker’s blanket bond does not extend credit and assumes the credit risk of the borrower. This is the sole responsibility of the financial institution. The bond is a regulatory requirement in some states requiring banks to obtain fidelity bonds to operate.

Coverage of indemnity insurance 

Banker’s blanket bond insurance is a type of insurance that covers the losses due to fraudulent acts of employees. In banking services, it is necessary because it gives protection against any damages. The following are the insuring clauses available:

The following are the insuring clauses available:

1. Infidelity of Employees:
   This clause provides coverage for any loss due to misappropriation or embezzlement by the dishonesty of the insured’s own employee(s).
2. On-premises:
   This clause provides coverage for loss &/or damage to the insured’s property due to various perils including fire whilst in the premises where the insured carries on a business and other specified places which should clearly be defined while opting for this clause. Some of the other risks of this section are followed as under:-  Cash in safe and on the counter ; Lockers
3. In-transit:
   This clause provides coverage for loss &/or damage to the insured’s property whilst in transit to and from premises along the defined geographical area.
4. Forgery and Alteration:
   This clause provides coverage for loss caused due to forgery or alteration (forgery means the forging or fraudulent alteration of any document or the uttering of any forged or fraudulently altered document by the employee(s) whereby one obtains possession of monies or goods.) as well as forged cheques.
5. Securities:
   This clause covers securities of the insured (Stock, Certificates, Bonds, and other Governmental guaranteed authority stocks, etc) whilst in insured premises or others due to loss &/or damage resulting from named calamities.
6. Counterfeit Currency:
   This clause provides coverage for loss resulting from the acceptance of counterfeit currency by the teller or other charged employee of the insured provided normal and standard procedures and precautions are fully exercised.
7. Office and Contents:
   This clause provides coverage for loss &/or damage caused by fire and other perils to the office. The contents of the insured’s premises should specifically be named whilst opting for this coverage. Fixed assets and Computer Equipment are also part of this section.

What Risks Are Covered?

This form of insurance is specifically designed to protect against losses of money, securities or other physical properties sustained as a result of a dishonest act by an employee. These bonds add a layer of protection for the institution in question, not the shareholders, which makes this a first-party coverage.

Here are some other risks covered under this insurance:

• Forgery or fraudulent alteration of checks, bills, drafts, money orders, etc.
• Loss of or damage to office and contents (i.e. fixtures, furnishings, equipment)
• Loss or damage to ATM’s and cash in the ATM’s
• Losses incurred by the insured in the usual course of business