insurance company bond coverage application · insurance company bond coverage application...

FIIC-S-14101 Ed. 02-14 of 10 © 2014 The Travelers Indemnity Company. All rights reserved.

Insurance Company BondCoverage Application

Travelers Casualty and Surety Company of America

The term Applicant means all corporations, organizations or other entities, including subsidiaries and employee benefit plans subject to ERISA, proposed for this insurance.

I. GENERAL INFORMATION

1. Applicant Information:

Name of principal Applicant:

Street Address:

City, State, ZIP Code:

Expiring Bond Number:

2. Applicants’ dominant Standard Industrial Classification (SIC) code, if known (4-digit number):

II. ADDITIONAL APPLICANTS (OTHER THAN PRINCIPAL APPLICANT)*

Complete the following table indicating all entities proposed for this insurance:

Name of Entity

Percent of direct or indirect ownership by, or relationship

to, principal Applicant

Description of Operations (if non-insurance company operations) and Relationship to Principal Applicant

To enter more information, attach a separate page or an organization chart.

*IMPORTANT NOTE: Receipt of this information does not constitute an agreement that coverage will be provided to the listed entities.

III. EMPLOYEE/LOCATION/EXPOSURE INFORMATION

1. Number of employees at all locations: Include full time, part time, leased, temporary, volunteer and seasonal workers.

2. Locations:

a. Main Office of the principal Applicant: 1

b. All other locations of the Applicants: Include all other offices handling insurance and non-insurance operations, claim-handling offices, mobile branches, etc. +

c. Total number of locations: =

3. Are any of the above locations or employees located outside the United States? Yes No If Yes, attach full details.


4. Is coverage desired on non-employee draft-signers who, while in the service of a policyholder of the Applicant are authorized to sign drafts on the Applicant’s behalf? Yes No If question III.4. is Yes:

a. What is the number of such draft-signers?

b. What is the maximum dollar amount of authority provided to each draft-signer? $

c. Are authority levels supported by written contract setting forth rights and responsibilities? Yes No

Attach full details as to how such draft-signing authority is monitored or supervised.

IV. REGULATORY/MANAGEMENT/OWNERSHIP INFORMATION

1. Has there been any disciplinary action taken against any Applicant during the previous three years by any regulatory authority, including any consent, disciplinary, enforcement or cease and desist orders, or similar agreements or restrictions? Yes No If Yes, attach full details.

2. Has there been any change in the Board of Directors or senior management of any Applicant within the past 3 years for reasons other than death or retirement? Yes No If Yes, attach an explanation.

3. During the past 3 years has there been a change in ownership of any Applicant or of the controlling holding company that resulted in a change in ownership of 10% or more of the outstanding voting stock? Yes No If Yes, attach full details.

V. AUDIT INFORMATION

1. Do all Applicants have an annual CPA audit of their financial statements? Yes No If No, attach an explanation.

2. Do all Applicants have a management letter prepared in connection with their annual CPA audit? Yes No

3. Have all Applicants complied with all recommendations made as a result of its most recent audit? Yes No If No, attach an explanation of any non-compliance with such recommendations.

4. Have any material weaknesses or significant deficiencies in internal controls been reported in in connection with the most recent CPA audits of the Applicant’s financial statements? Yes No If Yes, attach all management letters and management’s response.

5. Does the Applicant have an audit committee of the Board of Directors comprised solely of independent directors? Yes No

6. Does the Applicant have an internal audit function completely separate from its operating departments? Yes No

If Yes, please also answer the following questions:

a. Who performs this function? Employees Number of:

Third Party Name of:

b. To whom does the internal audit function report?

c. What is the approximate average experience of the internal audit personnel, in years?

d. Does the internal audit department require a certain set of qualifications or continuing education requirements to continue in the department? (i.e. do internal auditors have a CPA/CMA/CIA license or are they working toward such a license?) Yes No

e. Does the scope of the internal audit function cover all Applicants and all locations? Yes No If No, attach an explanation.

f. Have the scope and objectives of the formalized audit plan been met in the past two years? Yes No

g. Are the people responsible for the auditing function forbidden to originate transactions,


record or approve journal entries or complete or approve account reconciliations? Yes No

h. Does the internal audit include periodic surprise examinations of cash, securities, all departments, branches and accounts? Yes No

i. Does the internal audit department produce periodic reports that are rendered directly to the Audit Committee of the Board of Directors? Yes No

j. Are there follow-up audits where previous audits have found weaknesses in internal controls? Yes No

k. Are all auditee Applicants required to provide a formal response to internal audit Yes No recommendations.

l. Do branch office and subsidiary audits include a check of the date that premiums were paid against daily reports to make sure branch employees are not holding back premiums to cover shortage or misappropriation? Yes No

If any of V.6 (d)-(l) above are answered “No”, please attach an explanation.

VI. MANAGEMENT/OPERATIONS

1. Does any Applicant anticipate in the next twelve months establishing or entering into any ventures or services unrelated to those currently pursued? Yes No If Yes, attach full details

2. Is there segregation of duties within all Applicants’ operations so that no single transaction (including claims handling and draft issuance procedures) can be fully controlled from origination to posting by one person? Yes No

3. Does any Applicant have any life insurance or brokerage operations? Yes No If Yes, please answer questions 4. and 5. If No, skip to Section VII

4. As respects the Applicant’s life insurance or brokerage operations:

a. Are any general agents, soliciting agents, financial services representatives or registered representatives permitted to initiate funds transfer requests on behalf of a policyholder or customer? Yes No

If Yes, attach information regarding how such agents or representatives are prevented from making unauthorized transactions.

b. Regarding general or soliciting agents, does any Applicant allow an agent to have Power of Attorney for a customer? Yes No

5. Do Applicants obtain verification that their general and soliciting agents carry fidelity coverage on their agency operations? Yes No

VII. RECEIPT AND DISBURSEMENT CONTROLS

1. Please indicate which of the following are used to make payments:

a. Pre-printed Checks? Yes No

b. Pre-printed Drafts? Yes No

c. Computer generated Checks? Yes No

d. Computer generated Drafts? Yes No

e. Electronic Funds Transfer? Yes No

If “Yes” to any of the above, attach an explanation of how such checks, drafts or electronic signature files are secured.

2. Are all payment operations segregated from the individuals or departments that:

a. Request the payment? Yes No

b. Authorize the payment? Yes No


3. Indicate limit(s) at which checks, claim drafts and electronic funds transfer requests require the signature or authorization of more than one employee:

a. Checks? All All exceeding: $

b. Drafts? All All exceeding: $

c. EFT requests? All All exceeding: $

4. Is supporting documentation that includes the check, draft or transaction number and date affixed thereto, presented at the time of authorization or signatory request? Yes No

5. Are the supporting documents adequately canceled at the time of payment to prevent subsequent or duplicate processing? Yes No

6. Are signed checks or drafts returned to the persons who have requested them? Yes No

7. Are all incoming checks and drafts immediately endorsed “for deposit only”? Yes No

8. Are bank statements addressed to and reconciled at least monthly by persons not authorized to sign checks/drafts, initiate payments, authorize payments, make deposits or withdrawals? Yes No

9. Are dates of reconciliations ever varied for purposes or surprise verifications? Yes No

10. Are paid checks/drafts/EFT’s matched with issued records? Yes No

11. Are records of receipts and disbursements fully detailed and are all journal entries and correcting vouchers approved? Yes No

12. Are the records from which premium billings are prepared reconciled periodically with in-force insurance listings? Yes No

13. Does a person not having access to cash control the records used for preparation and mailing of:

a. Premium notices? Yes No

b. Lapse notices? Yes No

14. Do copies of lapse notices go to another person not under the direction of the premium department for follow-up? Yes No

15. Is an independent record kept for all mail receipts so that their prompt entry into the records may be readily available? Yes No

16. Are branch office/subsidiary deposits supported by duplicate deposit tickets sent directly to the principal Applicant or main location? Yes No

17. Which of the following methods are used by the Applicants’ banking institution to confirm the authenticity of internal electronic funds transfer requests initiated by telephone, telefacsimile (fax) machine, email or electronic banking system?

a. Callbacks to a predetermined telephone number or an individual other than the initiating party? Yes No

b. Callbacks using voice recognition verification? Yes No

c. Callbacks using Test Keys, Passwords, or PIN’s? Yes No

d. Secondary Email verification from an individual other than the initiating party? Yes No

e. Dual Signature on all written instructions? Yes No

f. Electronic banking application input using any of the following controls:

i. Dual authorization (or higher)? Yes No

ii. Digital certificates? Yes No

iii. Token cards? Yes No

iv. Multifactor authentication? Yes No

v. Prompt removal of individuals no longer authorized to input? Yes No

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g. Do any individuals involved with electronic banking input or administration participate in any of the following:

i. Shared user ID’s or passwords? Yes No

ii. Display of user id or password information in an unsecured manner? Yes No

iii. Any other method to bypass general banking application security or controls? Yes No

If “Yes” to any question in 17 (g), please attach an explanation.

VIII. PURCHASING CONTROLS

1. Is access to all vendor files segregated from the individuals or departments responsible for making payment? Yes No

2. Are all expense bills, for all Applicants and locations, duly approved and properly vouchered before payment is authorized or made? Yes No

3. Are purchase orders pre-numbered with copies for the initiating, receiving, auditing and accounting departments? Please explain exceptions, if any, in an attachment to this application. Yes No

4. Are vendors, attorneys, general adjusters and salvage firms that are used for claim handling, formally investigated as to financial stability and reputation with services obtained only from those on the approved list? Yes No

5. Are invoices matched with purchase orders and receiving data prior to a payment being generated? Yes No

IX. INVESTMENTS (Applicants’ own portfolio and brokerage/mutual fund subsidiary activity, if applicable.)

1. Is there an Investment Committee of the Board of Directors that sets policy and procedures? Yes No

2. Do the Applicants have a formal set of investment policies and objectives? Yes No

3. Are the purchases and sales of securities segregated from the reconciliation of such transactions? Yes No

4. Are all investment transactions authorized and are invoices carefully checked? Yes No

5. Are confirmations of investment transactions sent to others than those who initiate the securities transactions for the Applicants’ portfolio? Yes No

6. Is the investment portfolio reviewed by an executive with the responsibility for determining that investments are in compliance with the State insurance code? Yes No

7. Are the securities of the Applicants’ investment portfolio periodically inspected or confirmed with safekeeping custodians and balanced with securities records? Yes No

8. Is investment committee approval required for: Yes No

a. Purchases, sales and leases of real estate for investment purposes? Yes No

b. Setting the sales price for previously foreclosed property? Yes No

c. Significant renovations or improvements to real estate held? Yes No

If No to IX.8 (a), (b) or (c), please attach an explanation.

9. If investment properties are being managed for the Applicants by independent entities (such as Servicing Contractors) are each such entity’s records periodically reviewed by internal audit staff or other Applicant representatives to determine the propriety of expenses and to account for income? Yes No

10. a. Does any Applicant use the services of an outside party to provide investment funds management services for mutual fund or other investment products offered to customers? Yes No

If Yes, provide the name of the outside firms:

b. Are the services provided audited by the Applicants periodically or are audits of the outside party reviewed by the Applicants? Yes No


X. REAL ESTATE LENDING AND POLICYHOLDER LOANS

(If the Applicants have no real estate lending or policyholder loan operations, skip to the next section.)

1. Are all real estate loans and purchases of existing mortgages authorized by:

a. a loan or investment committee of the Board of Directors? Yes No

b. someone else? If yes, specify by whom: Yes No

2. Is approval of each loan recorded in the minutes of the meeting of the committee? Yes No

If No, please explain how is approval documented?

3. Is the responsibility for follow-up of delinquent loans clearly delegated to someone other than those involved in the origination or approval the original loan? Yes No

4. a. Are life insurance policy loans examined and initialed by a second individual? Yes No

b. Are the signatures of policyholders on the request for loans checked against policyholders’ signatures already on file? Yes No

c. Are checks for loan proceeds always sent directly to the policyholder? Yes No

If the answer to any of 4 a, b or c is No, please attach an explanation.

XI. CLAIMS

1. Is the signature (manual or electronic) approval of a claims adjuster required prior to the processing of a claim for payment? Yes No

2. Do the duties of claim supervisors include:

a. The review of all claim files over a certain dollar amount? Yes No

b. The approval for payment of all claims over a certain dollar amount? Yes No

c. The approval of the provision of outstanding claims at the end of the fiscal year? Yes No

d. Overall control of the claims adjusting of all lines insured? Yes No

e. The handling of salvage and recoveries? Yes No

3. Is the claim file presented as supporting documentation when claim checks, drafts, or electronic funds transfer requisitions are approved and signed, as applicable,? Yes No

4. Does any Applicant use Third Party Administrators to provide claim adjustment services? If yes, please attach a list specifying by whom such services are provided. Yes No

5. a. Does the Applicant perform Third Party Administrator audits on a regular basis? Yes No

b. Are follow-up audits performed where previous audits have discovered errors or irregularities? Yes No

XII. COMPUTER SECURITY

1. Do any Applicants use the services of an outside data processor? Yes No

2. a. Does the Applicant have in-house data processing capabilities? Yes No

b. Are computer programmers forbidden to function as computer operators? Yes No If No, attach an explanation.

3. Do the Applicants/locations listed below have the following capabilities with regard to computer systems?

Inquiry Update a. Principal Applicant/Main Location: Yes No Yes No

b. Subsidiaries/Branch/Other Applicant Locations: Yes No Yes No

c. Non-Applicant Locations: Yes No Yes No

If questions 2(a) and 3(a)-(c) above are answered “No”, do not complete the remainder of this Section XII.


4. Is the ability to initiate transactions having monetary impact or master file changes from non-Applicant controlled locations restricted through the use of a password or code word? Yes No

a. If so, are unique passwords assigned to specific individuals? Yes No

b. If not, describe how passwords are assigned:

c. If so, are passwords changed or required to be changed periodically? Yes No

d. If so, are password assignments and changes securely communicated and affirmed to ensure their integrity? Yes No

e. Is each user required to establish responses to a series of security questions? Yes No

5. Are individual’s respective passwords immediately terminated upon the termination of any:

a. Applicant employee using in-house supported application systems? Yes No

b. Applicant employee using service bureau supported application systems? Yes No

c. Non-Applicant user’s employee? Yes No

6. Is there immediate reporting and follow-up of unauthorized or unsuccessful attempts to establish access to or sign on to the system, or access specific information for the purpose of updating or changing data? Yes No

7. Is there a maximum number of sign-on attempts after which the user or session is suspended? Yes No

8. Are the following categories of electronic transactions confirmed on a daily basis:

a. Transactions initiated by an Applicant which are transmitted to externally-supported systems? Yes No

b. Transactions initiated by external users which are submitted to an Applicant’s in-house supported system? Yes No

9. Are there incident response procedures in place addressing electronic intrusion attempts, attacks or breaches, whether internal or external in origin? Yes No

10. How frequent are the audits of information security and controls?

11. Are there layered or tiered information system architectures that place increasingly sensitive hardware, software, and data behind increasingly complex access controls? Yes No

12. a. Are vulnerability assessments of computer systems conducted and are results summarized and communicated to systems security and/or internal audit? Yes No

b. if yes, by whom?

XIII. CUSTOMER INITIATED FUNDS TRANSFERS

(If the Applicants do not allow customer initiated funds transfers, skip to the next section.)

1. Which of the following methods are used to confirm the authenticity of customer initiated wire transfer requests initiated by telephone, telefacsimile machine, electronic mail or text message:

a. Password/PINS? Yes No

b. Callbacks to an individual other than the initiating party for corporate requests? Yes No

c. Callbacks to a pre-determined telephone number for personal requests? Yes No

d. Other? Please specify Yes No

2. Indicate the dollar amount above which callback procedures are required:

Telephonic Voice: $

Facsimile Machine: $

Electronic Mail (e-mail): $

Text Message: $


3. Are transaction verifications:

mailed Yes No e-mailed Yes No

to customers within one business day following the execution of the transaction?

XIV. CURRENT INSURANCE INFORMATION/REQUESTED INSURANCE TERMS

Complete the following table or submit a copy of your current bond, declarations and all endorsements:

Effective Date: Expiring insurer: Expiring premium: $

Desired Bond Coverage Requested Limit Requested Deductible

Fidelity Employee Dishonesty Including Excluding Contract EDP’s Trading Loss ERISA Restoration Expenses

$ $ $ $

$ $ $0 $

On Premises $ $

In Transit $ $

Forgery or Alternation $ $

Securities $ $

Kidnap and Ransom $ $

Counterfeit Money and Counterfeit Money Orders $ $

Claim Expense $ $

Agents of Life Insurance Companies General Agents (number of) _______

$

$

Soliciting Agents (number of) _______ $ $

Servicing Contractors (number of) _______ $ $

Third Party Administrators (number of) ______ $ $

Real Property Mortgages – Defective Signatures $ $

Computer Systems Computer Fraud Fraudulent Instructions Remote Access PBX System Fraud Restoration Expenses

$ $ $ $

$ $ $ $

XV. LOSS INFORMATION

1. Has any Applicant or any proposed insured sustained any bond-related losses, whether or not covered by insurance, in the past 3 years? Yes No Include any incident which may lead to the filing of notice of claim with an Applicant’s current carrier (Include any occurrence exceeding $5,000. Occurrence means the total loss or series of losses involving the fraudulent activity of one individual.)

If Yes, please complete the table below and attach a separate sheet if necessary:

Date Discovered

Description of Loss

Amount of Loss

Amount Recovered from

Insurance

CorrectiveProcedures

Implemented

Claim Status

$ $

$ $


XVI. REQUIRED ATTACHMENTS

As part of this Application, please submit the following documents:

• Copy of most recent CPA Audit (if not filed with the SEC)

XVII. COMPENSATION NOTICE

Important Notice Regarding Compensation Disclosure

For information about how Travelers compensates independent agents, brokers, or other insurance producers, please visit this website: http://www.travelers.com/w3c/legal/Producer_Compensation_Disclosure.html

If you prefer, you can call the following toll-free number: 1-866-904-8348. Or you can write to us at Travelers, Enterprise Development, One Tower Square, Hartford, CT 06183.

XVIII. FRAUD WARNINGS

Attention: Insureds in Arkansas, D.C., Maryland, New Mexico, and Rhode Island Any person who knowingly (or willfully in MD) presents a false or fraudulent claim for payment of a loss or benefit or who knowingly (or willfully in MD) presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison.

Attention: Insureds in Colorado It is unlawful to knowingly provide false, incomplete, or misleading facts or information to an insurance company for the purpose of defrauding or attempting to defraud the company. Penalties may include imprisonment, fines, denial of insurance, and civil damages. Any insurance company or agent of an insurance company who knowingly provides false, incomplete, or misleading facts or information to a policyholder or claimant for the purpose of defrauding or attempting to defraud the policyholder or claimant with regard to a settlement or award payable from insurance proceeds shall be reported to the Colorado Division of Insurance within the Department of Regulatory Agencies.

Attention: Insureds in Florida Any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony of the third degree.

Attention: Insureds in Kentucky, New Jersey, New York, Ohio, and Pennsylvania Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information or conceals for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties. (In New York, the civil penalty is not to exceed five thousand dollars ($5,000) and the stated value of the claim for each such violation.)

Attention: Insureds in Louisiana, Maine, Tennessee, Virginia, and Washington It is a crime to knowingly provide false, incomplete, or misleading information to an insurance company for the purpose of defrauding the company. Penalties include imprisonment, fines, and denial of insurance benefits.

Attention: Insureds in Puerto Rico Any person who knowingly and with the intention of defrauding presents false information in an insurance application, or presents, helps, or causes the presentation of a fraudulent claim for the payment of a loss or any other benefit, or presents more than one claim for the same damage or loss, shall incur a felony and, upon conviction, shall be sanctioned for each violation with the penalty of a fine of not less than five thousand dollars ($5,000) and not more than ten thousand dollars ($10,000), or a fixed term of imprisonment for three (3) years, or both penalties. Should aggravating circumstances be present, the penalty thus established may be increased to a maximum of five (5) years; if extenuating circumstances are present, it may be reduced to a minimum of two (2) years.


XIX. SIGNATURE SECTION

THE UNDERSIGNED OFFICER OF THE APPLICANT (AUTHORIZED REPRESENTATIVE) DECLARES THAT TO THE BEST OF HIS/HER KNOWLEDGE AND BELIEF, THE STATEMENTS SET FORTH IN THIS APPLICATION FOR INSURANCE AND MATERIAL SUBMITTED THEREWITH ARE TRUE AND COMPLETE. SUCH APPLICATION AND MATERIALS WILL BE RELIED ON BY TRAVELERS AND BE THE BASIS OF THE INSURANCE. IF ANY INFORMATION IN THIS APPLICATION CHANGES PRIOR TO THE INCEPTION DATE OF THE BOND, THE APPLICANT WILL NOTIFY TRAVELERS OF SUCH CHANGES AND TRAVELERS MAY MODIFY OR WITHDRAW ANY OUTSTANDING QUOTATION. TRAVELERS IS AUTHORIZED TO MAKE INQUIRY IN CONNECTION WITH THIS APPLICATION. THE SIGNING OF THIS APPLICATION DOES NOT BIND TRAVELERS TO OFFER, NOR THE APPLICANT TO PURCHASE, THE INSURANCE.

ELECTRONICALLY REPRODUCED SIGNATURES WILL BE TREATED AS ORIGINAL. Signature*: Officer of Applicant Name (Printed) (Authorized Representative) Title Date

XX. PRODUCER INFORMATION (ONLY REQUIRED IN FLORIDA, IOWA, AND NEW HAMPSHIRE): Producer Signature* Producer Name (Printed) Agency Name Agency Code License Number *IF YOU ARE ELECTRONICALLY SUBMITTING THIS APPLICATION TO TRAVELERS, APPLY YOUR ELECTRONIC SIGNATURE TO THIS FORM BY CHECKING THE ELECTRONIC SIGNATURE AND ACCEPTANCE BOX BELOW. BY DOING SO, YOU HEREBY CONSENT AND AGREE THAT YOUR USE OF A KEY PAD, MOUSE, OR OTHER DEVICE TO CHECK THE ELECTRONIC SIGNATURE AND ACCEPTANCE BOX CONSTITUTES YOUR SIGNATURE, ACCEPTANCE, AND AGREEMENT AS IF ACTUALLY SIGNED BY YOU IN WRITING AND HAS THE SAME FORCE AND EFFECT AS A SIGNATURE AFFIXED BY HAND. AUTHORIZED REPRESENTATIVE’S ELECTRONIC SIGNATURE AND ACCEPTANCE PRODUCER’S ELECTRONIC SIGNATURE AND ACCEPTANCE

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