You should consider investment manager indemnity insurance if your business manages investor money, operates a fund, provides investment advice, acts as a responsible entity (RE) or trustee, or could face investor, regulatory, governance, crime or employment claims.
Investment Manager Indemnity insurance may combine Professional Indemnity (PI), Directors and Officers (D&O), regulatory investigation, crime and Employment Practices Liability (EPL) into one coordinated policy. The bundle exists because a single claim at a fund manager can cross PI, D&O and crime boundaries. With separate policies from different insurers, each may argue the claim belongs to the other. IMI puts one insurer across all sections so that doesn't happen.
Not every fund manager needs every section. The mix depends on the licence, client type, fund structure and services. For a full overview of how IMI works, see what is investment manager indemnity insurance.
At a glance
- AFSL holders serving retail clients may have PI and compensation duties
- Fund managers can face PI, D&O and crime claims from a single event
- REs may need broader governance and statutory cover
- Crime addresses a different loss from PI or D&O
- Cyber should be assessed separately. It isn't always part of IMI
- Retail, wholesale and institutional managers have different exposures
- Investor or contract requirements may exceed minimum legal duties
Do I need investment manager indemnity insurance?
This table is a starting point. One material exposure may justify a review.
Swipe left or right to see the full table.
Who should consider investment manager indemnity insurance?
This is the core IMI audience. Any business that makes or implements investment decisions for external investors may face claims alleging mandate breaches, unsuitable strategy, poor reporting or undisclosed conflicts. The PI section is the starting point because it responds to claims about how the fund was managed.
If the manager also has directors, employees handling fund money or compliance committees, D&O and crime become relevant. The more funds and entities involved, the more important it is that every one is listed on the policy schedule. A fund that isn't named may not be covered.
Responsible entities
An RE operates a registered managed investment scheme and holds scheme property on trust for unitholders. That creates governance, fiduciary and statutory duties that go beyond what a stand-alone adviser faces. REs are exposed to investor claims, ASIC inquiries, Product Disclosure Statement (PDS) challenges and compliance failures.
The D&O section is especially relevant here. RE directors may face personal claims relating to scheme governance and statutory duties. If the RE is external and oversees several schemes, the exposure multiplies across each fund. Every scheme should be checked against the policy schedule.
PE and VC managers face a different profile. Claims can arise from due diligence, valuation disputes, conflicts and deal execution. Investor claims sometimes come years after the decision, so the retroactive date and run-off cover matter.
PE managers who hold board seats on portfolio companies face D&O exposure at both levels: the fund manager and the portfolio company. The policy should address this dual exposure. Crime cover is relevant where the manager handles investor capital directly.
Complex strategies, leverage and concentrated positions create unique exposure. Investors may allege the manager took risks outside the mandate, failed to manage drawdowns or provided misleading data. If the fund trades in multiple countries, the territorial scope of the policy counts.
Hedge funds may also face regulator scrutiny over short-selling, disclosure timing or market conduct. The regulatory section should be checked to confirm it covers the right bodies and the right trigger stage.
Property fund managers
Property managers face the standard fund risks plus valuation, liquidity and related-party exposure. Some policies restrict claims arising from valuation, development or asset-pricing work. Property and development fund managers should confirm these activities fall within the defined services and check whether any specific exclusions apply.
If the manager also develops property (not just manages the fund), the development work may fall outside the IMI wording and need separate PI or construction cover.
Boutique asset managers
A small team doesn't mean small risk. Boutique managers often have limited compliance resources and concentrated risk in a single strategy or fund. The claim categories can mirror those of larger firms, but the capacity to absorb legal costs or fund a regulator response from the balance sheet is more limited.
A sole-director manager should assess PI, D&O, crime and regulatory exposures based on its licence, services and fund structure. Being small doesn't reduce the claim types. It reduces the buffer.
Investment advisers and consultants
Advisers who recommend investments, build model portfolios or manage mandates may face suitability, disclosure and execution claims. If the adviser holds an AFSL and serves retail clients, PI is commonly required under the compensation rules.
Some advisers operate under a corporate authorised representative (CAR) arrangement with an AFSL holder. Whether the CAR needs its own IMI or sits under the licensee's policy depends on the authorisation setup and the scope of services.
Trustees and corporate trustees
A trustee of a trust faces governance and compliance claims. D&O is relevant for the trustee's directors. PI is relevant if the trustee also provides investment or admin services. Check whether the trust itself is a named insured or just the trustee entity.
Family offices and outsourced CIOs
A family office managing private wealth across several asset classes may face investment claims, governance exposure and crime risk. An outsourced Chief Investment Officer (CIO) acting under delegated authority faces PI exposure similar to an internal team. If the office employs staff, EPL may be relevant.
Crypto and digital-asset managers
Insurer appetite varies. Some policies exclude crypto entirely. Others may cover it with restrictions, higher excesses or lower limits. If the fund holds or trades digital assets, confirm the policy doesn't exclude them. This is an area where the wording matters more than the label.
Is insurance mandatory for investment managers in Australia?
IMI as a full package isn't required by one universal rule. But the individual sections may be required or expected depending on the licence, investor type and business structure.
Section 912B of the Corporations Act
AFS licensees that provide financial services to retail clients must have arrangements to compensate those clients for eligible losses. PI insurance is the main way relevant licensees commonly satisfy this. The obligation sits with the licensee. If a licensee provides services to both retail and wholesale clients, the compensation duty applies to the retail side.
ASIC RG 126
ASIC Regulatory Guide 126 (updated November 2024) sets ASIC's expectations for adequate PI. It doesn't prescribe a standard IMI package. Key expectations include:
- Cover linked to revenue. The guide ties the PI limit to the licensee's financial-services revenue from retail clients. For revenue up to $2 million, the minimum is $2 million in PI. For higher revenue, the limit should broadly match the revenue, up to a $20 million cap.
- Fraud and dishonesty. RG 126 includes expectations around fraud, dishonesty and infidelity protection, subject to its terms and exceptions. This is where crime cover overlaps with the compensation rules.
- AFCA awards. The cover shouldn't exclude Australian Financial Complaints Authority (AFCA) determinations. If AFCA makes an award against the licensee, the PI should be able to respond.
- Defence costs. ASIC favours defence costs in addition to the limit, not inside it. If costs are inside the limit, ASIC expects the limit to be higher to compensate.
- Retroactive cover. The policy should cover conduct from a reasonable date in the past, not just from the current policy start date.
These expectations relate to the licensee's retail-client compensation setup. D&O, crime and EPL sit outside the RG 126 framework and are driven by commercial need rather than this specific regulation.
AFSL conditions
The licence itself may impose cover requirements beyond RG 126. Some AFSLs specifically require the holder to maintain PI, D&O or crime cover as a condition. Check the licence conditions, not just RG 126.
Wholesale-only managers
A manager serving only wholesale or sophisticated investors is likely outside the retail compensation rules. But wholesale managers still face civil liability if investors allege negligence, and often face contractual cover requirements from custodians, prime brokers and institutional investors. Not being subject to RG 126 doesn't mean cover isn't needed.
Contractual and commercial triggers
Legal requirements aren't the only driver. Commercial relationships may set the floor for what cover the business needs to hold.
- External responsible entities. If an external RE oversees your fund, it may require the manager to hold PI and D&O at specified limits as a condition of the management arrangement. The RE has its own duties and needs the manager to be properly covered.
- Custodians and prime brokers. Custody agreements and prime brokerage contracts may require evidence of cover. The limits and sections may be specified. These are standard terms in institutional fund management.
- Institutional investors. Large investors, seed investors and sovereign wealth funds may require minimum PI and D&O limits before committing capital. This is a standard part of the due diligence process.
- Platform operators. If the fund is listed on a platform, the platform operator may require cover as a condition of listing. The platform has its own regulatory duties and needs to confirm the manager is properly insured.
- Fund constitution and investment agreements. The fund's own governing documents may require the manager or RE to maintain specified cover. If the cover lapses, the manager may be in breach of the fund's own rules.
- Directors and committee members. Directors, compliance committee members and investment committee members may seek D&O protection as a condition of serving. Without it, the role carries personal financial risk that most experienced professionals won't accept.
What risks may remain without adequate cover?
These are practical outcomes, not extreme scenarios.
Uninsured legal costs. An investor claim may involve substantial legal fees over months or years. Without PI, the manager funds the defence from the balance sheet. For a boutique firm, that can threaten the business.
Directors funding personal defence. A D&O claim against a director may require personal legal help. Without D&O cover, the director pays from personal assets or the company indemnifies them, draining the business at the same time it's dealing with the claim.
Regulator response costs. An ASIC inquiry may require specialist legal help from the first notice. The cost of responding to information requests, interviews and document production sits with the business and the people involved unless inquiry cover is in place.
Direct crime losses. An employee who diverts fund money or forges payment instructions causes a direct financial loss. Without crime cover, the manager or fund absorbs that loss. Getting it back through recovery action takes time and money.
Contractual or fund-launch requirements. If the fund constitution or an institutional mandate requires specified cover and the manager doesn't hold it, the manager may be in breach. A new fund may need evidence of cover before the RE or custodian will proceed. Without it, the launch stalls.
Investment Manager Indemnity or separate PI, D&O and crime policies?
Some managers ask whether they can arrange PI, D&O and crime as separate stand-alone policies instead of a bundled IMI.
They can. But there's a practical risk. A single event may trigger claims across several sections. An employee fabricates trades (crime), the fund suffers losses that investors blame on manager negligence (PI), and ASIC investigates the directors for failing to supervise (D&O). With separate policies from different insurers, each may argue the claim belongs to the other policy.
The IMI bundle puts one insurer across all sections. That doesn't guarantee cover for every claim. But it may reduce the risk of a boundary dispute between insurers at the same time the business is dealing with the actual claim.
For a full breakdown, see IMI: PI, D&O and cyber explained.
How upcover can help
upcover arranges investment manager indemnity insurance for eligible Australian businesses. Options can be compared using consistent funds under management (FUM), fund structures, entities and services so wording differences are easier to spot.
For a full overview of how IMI works, see what is investment manager indemnity insurance.
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Get an IMI insurance quote through upcover
upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.
Frequently asked questions
Do all fund managers need IMI?
Not every manager needs the full bundle. The right mix depends on the licence, fund structure, investor profile and services. Any business managing investor money should review its PI, D&O and crime exposures against its actual obligations.
Is PI mandatory for an AFSL holder?
AFS licensees serving retail clients must have adequate compensation arrangements under s912B. PI is the main way most comply. ASIC RG 126 sets the expectations. Wholesale-only licensees may sit outside this rule but still face civil and contractual duties.
Do wholesale-only managers need PI?
RG 126 addresses retail clients. But wholesale managers still face civil liability if investors allege negligence. They also often face contractual cover requirements from custodians, prime brokers and institutional investors.
Do private equity managers need IMI?
PE managers face claims from due diligence, valuation, deal execution and board-seat exposure at portfolio companies. IMI can address the PI and D&O risks. Crime cover is also worth reviewing where the manager handles investor capital.
Does a responsible entity need D&O?
RE directors may face personal claims relating to scheme governance and statutory duties. D&O cover may protect against insured personal defence costs and, where covered, damages. The more schemes the RE operates, the broader the exposure.
Do sole-director boutique managers need cover?
A sole-director manager should assess PI, D&O, crime and regulatory exposures based on its licence, services and fund structure. Being small doesn't reduce the claim types. It reduces the buffer.
The information in this article has been prepared without taking into account your individual needs, objectives or financial situation. It should not be relied upon as personal advice. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.
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