Liberty Specialty Markets (LSM), a division of US-based Liberty Mutual Group, has partnered with Baobab Insurance, a digital underwriter of technical risks, to launch a new e-crime insurance product.
The new fidelity insurance product will offer coverage of up to €5 million, providing a tailored solution for small and medium-sized enterprises (SMEs) against fraud incidents such as CEO fraud and deepfake scams. According to LSM and Baobab, this marks the first time a product specifically addressing these risks has been designed for SMEs.
LSM will provide capacity for the product, while Baobab will manage operational aspects, including broker sales, product development, and underwriting. The collaboration aims to expand coverage options for businesses facing digital fraud risks.
The product launch comes as generative AI has increased the sophistication and scale of digital fraud threats. Cases of CEO fraud, in which cybercriminals impersonate senior executives, rose by 17% in 2023 compared to the previous year.
LSM and Baobab highlighted that traditional insurance offerings have not kept pace with evolving cyber threats, leaving businesses with limited coverage options.
While there is overlap between e-crime and cyber insurance, the latter often includes coverage for both first-party losses (e.g., costs to investigate and remediate a breach) and third-party liabilities (e.g., legal expenses from lawsuits).
Meanwhile, e-crime insurance typically addresses direct financial losses resulting from criminal acts such as theft, fraud, and forgery, whether perpetrated by external actors or employees.
However, with increasingly sophisticated threats, overlaps between the two segments are starting to show. Specialist brokerage Amwins notes that the distinction between crime insurance and cyber insurance is becoming increasingly blurred, especially concerning social engineering fraud. Both policy types may cover incidents where employees are deceived into transferring funds or divulging sensitive information.
Baobab Insurance says that it has structured the e-crime policy with a simplified application process, reducing the standard industry questionnaire from around 20 questions to five key risk criteria.
These include the number of employees, annual turnover, business activities in sanctioned countries, the presence of dual control for invoicing, and existing fraud prevention measures.
Vincenz Klemm (pictured above), co-founder and managing director of Baobab Insurance, said CEO fraud and deepfake scams present a growing threat to SMEs. By combining the new e-crime insurance with existing cyber and IT liability policies, Baobab is expanding its offerings as a specialist insurer focused on technical risks.
The new fidelity insurance product will be available as a standalone policy from March 2025, with plans for future integration into cyber insurance application processes.
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