While the number of family offices has more than doubled over the last 15 years, there is still a dearth of insurance data on the unique risk trends impacting multi-generational families, according to a new report from Aon Private Risk Management (APRM), a division of Aon Affinity.
APRM’s inaugural Family Office Benchmarking Report offers insight into family office risk management strategies and trends impacting the segment, the company said.
“The risks affluent families face are rapidly evolving, heightening the possibility of loss to financial assets and damage to their reputation, as well as challenging their privacy and physical security,” said Jason Ott, president of APRM. “Bringing these trends and issues to center stage helps us build awareness, provide personalized risk management recommendations, and protect family offices and their future generations.”
Data for the study was gathered from 130 family offices in APRM’s network. The report surveyed families who were diverse in both number of members and generations, with 63% being single family offices and 37% being multi-family offices. The report covered all aspects of the risk landscape prominent families have to navigate, from liability issues to international exposures, including kidnap, ransom and extortion, APRM said.
Key findings of the report include:
- Families are making progress in several critical risk management areas, including
- Art and collections: Eighty-one per cent (81%) of all family members carried specialized art and collections coverage.
- Wind: Ninety-five per cent (95%) of all properties located in hurricane-prone areas were insured for damaging winds.
- Excess liability: One hundred per cent (100%) of family members carried excess liability coverage, with 93% also choosing excess uninsured and underinsured motorist coverage.
- However, they continue to lack sufficient coverage in some critical areas:
- Cyber: Just 2% of family offices carried comprehensive cyber liability coverage, and very few individual households had cyber coverage.
- Nonprofit directors and officers liability: Although many family members served on non-profit boards, just 15% carried individual D&O coverage.
- Employment practices liability: Nearly 15% of all families carrying domestic workers’ compensation coverage did not carry employment practices liability coverage.
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“As evidenced by this report, today’s risks are more complex and dynamic,” Ott said. “They require a highly personalized, proactive approach to risk management that evolves both with the family and the environment. More than ever, families need a partner who can help them understand and mitigate not just the risks they face today, but also the risks they will face five years from now.”