The provision is in response to a lawsuit brought by Herald Fund over assets lost in Bernard Madoff’s Ponzi scheme. Herald Fund was a Cayman Islands-registered entity that pooled smaller investments and directed them to Madoff’s wealth management firm.

Herald began using HSBC’s Luxembourg unit as a custodian bank for these investments in 2004. Madoff was arrested in 2008 and pleaded guilty to defrauding investors of around USD 65 billion. Herald sued HSBC Securities Services in 2009 to recover assets it claimed were lost in Madoff’s fraud, and after many years of litigation and appeals by HSBC, the bank provisioned USD 1.1 billion in its third-quarter financial results. It also intends to appeal the verdict.

It appears the lawsuit against HSBC relates to alleged oversight failures in acting as a custodian bank, i.e., it failed to carry out adequate checks on Madoff. Professional indemnity insurance should respond to claims of that nature, as it primarily covers claims alleging errors in the performance of professional services. The claim here is an illustrative example of the ‘long tail’ nature of many professional indemnity claims, where judgements and settlements may only materialise several years, or in this case well over a decade, after the alleged errors.

The payment is to be made in compensation for losses experienced in its Shield Master Fund pension fund. According to the Australian Securities and Investments Commission (ASIC), Macquarie was aware of liquidity risks in the fund that had resulted in investors’ savings being eroded but failed to place the Shield’s classes on a watch-list for heightened monitoring, reporting, and due diligence — as required by its investment governance framework. Nearly 3,000 members’ retirement savings were threatened by Macquarie’s governance failings.

Professional indemnity insurance should respond to a loss of this nature, as it involves compensatory payments to customers in respect of alleged failures in the performance of financial services.

The loss relates to suspected asset-backed finance fraud by US subprime auto lender Tricolor Holdings. In September 2025, Tricolor filed for bankruptcy during an investigation into whether it had double-pledged collateral for loans from different financial institutions. Early reviews of Tricolor’s records showed that roughly 40% of 70,000 loans pledged to creditors were backed by vehicles already used as collateral to secure other loans. Both JP Morgan and Barclays were named as secured lenders in Tricolor’s bankruptcy petition. Barclays has also set aside USD 147 million.

Crime insurance for banks is unlikely to respond to a fraud of this nature. This is because the coverage for documentary fraud by third parties is limited to certain documents, which typically do not include those relied upon by lenders in asset-based finance. However, it is possible to purchase specific insurance for asset-based finance fraud, albeit it is not widely available and attracts a significant premium.

The French investment fund is alleged to have pilfered from investors through a fraudulent Ponzi scheme. The fund had promised investors monthly interest rates of up to 27%, but by the start of April 2025, investors had not received any interest for the year. According to media reports, the firm’s founder, listed on the official French companies register as Pascal Nanot, stated that for personal reasons he was forced to accept the offer of a Luxembourg-based broker who had made him an ‘attractive’ business deal and transferred the company’s funds to the broker.

In February 2025, Nanot closed the company and claimed that he had requested the broker to return the funds, but the broker had failed to do so. The French judicial authorities have opened an investigation after receiving complaints from the fund’s investors.

Crime insurance provides broad coverage for the loss of funds due to dishonest, fraudulent or malicious acts by employees. However, coverage can be challenging where directors are involved, as most policies will exclude the acts of directors unless they are acting in an employee capacity. Beyond that, professional indemnity insurance can respond to claims in respect of dishonest or fraudulent acts by employees committed in the provision of professional services. However, as with crime insurance, coverage can be challenging where directors are involved, because the acts of the most senior individuals within an insured company are often imputed to it for the purposes of the dishonesty exclusion.

The class action lawsuit is for alleged excessive charges on certain premiums. These included premiums for life, total permanent disability, and income protection cover. The lawsuit alleged that Colonial First State (CFS) arranged superannuation group policies with insurer AIA that were not ‘in members’ best interests’ while similar, cheaper policies were available elsewhere. CFS settled without admitting liability. The settlement amount ranks as one of Australia’s largest-ever payouts related to superannuation insurance.

It is worth noting that excessive fees claims are one of the most frequent causes of operational risk losses suffered by financial institutions, according to published data. Professional indemnity insurance does not cover payments of wrongly charged fees or interest, as almost all policies will have an exclusion in that respect (often described as a Fees Exclusion or a Disgorgement Exclusion). Beyond that, coverage may be available for legal costs in defending such claims, and a well-drafted policy should provide coverage for costs incurred in responding to non-routine regulatory investigations into the provision of professional services, including the charging of excessive fees.

The bank lost the funds after a cyber-attack on C&M Software — a third-party technology company that provides connectivity infrastructure to financial institutions in Brazil. After an employee of C&M allegedly sold his login credentials to cybercriminals, threat actors gained unauthorised access to BMP’s reserve account and stole funds. Five other financial institutions were affected by the cyber-attack.

Crime insurance provides coverage for various forms of fraud, including the theft of funds by third parties via unauthorised access to computer systems. Where third-party service providers are at fault, as appears to be the case here, insurers are likely to seek to subrogate against the service provider for the insured financial institution’s losses.

NAB disclosed it underpaid staff wages and entitlements and would make payments to resolve and remediate the issues. The disbursements hiked the bank’s full-year operating expenses by approximately 4.5%. NAB said it first identified issues with its payroll system during a 2019 review and that further issues surfaced during preparatory work to transition to a new enterprise agreement.

Employment practices liability insurance responds to compensatory claims against companies in respect of alleged employment wrongs, e.g., discrimination. However, it does not cover amounts that the company was due to pay employees. That includes amounts such as redundancy payments and, as per this example, payments to correct the underpayment of wages. Beyond that, coverage may be available under policies for legal costs incurred in responding to regulatory investigations into underpayment of wages.