Although globally over fifty different types of insurance coverages are available specifically for banks, six types are of primary concern.

The Bankers Blanket Bond/Financial Institution Bond (BBB/FIB)- This coverage generally consists of six basic insuring agreements: employee dishonesty, loss of property on premises, loss of property in transit, forgery, forged securities, and counterfeit money. The BBB/FIB has traditionally provided the cornerstone for any bank insurance program. Although, most banks world-wide purchase this coverage, which is mostly a function of management's perception of operational risk exposures as well as generally accepted business customs. Further, there are no rules either formal or informal for establishing bond limits. Only in some jurisdicticus there are legal or regulatory requirements that a financial institution purchase a BBB/FIB

Electronic and Computes Crime (ECC) Coverage -The ECC may either be a separate or stand-alone policy or appended to the BBB/FIB. It is designed to respond to financial loss from third-party fraud or mysterious and unexplained disappearance relating to the insured computer or telecommunications systems. It is for this reason that ECC coverage may not be written without a BBB/FIB being present. The ECC (in its London form) currently consists of eleven insuring agreements i.e Computer Systems, Insured Service Bureau Operations, Electronic Computer Instructions, Electronic Data and Media, Computer Virus, Electronic Communications, Electronic Transmissions, Electronic Securities, Forged Tele facsimile, and Voice Initiated Transfers. Generally, the ECC is purchased in the same limit as the BBB/FIB since it is truly a companion piece to the BBB/FIB.

Directors and Officers (D&O) Coverage - D&O coverage indemnifies directors and officers of the bank against liability claims arising from alleged negligence, wrongful acts, errors and omissions. The wording and insuring agreements of directors and officers policies are specific to the jurisdiction in which the coverage is being written. On a global basis, D&O coverage is rapidly overtaking the BBB/FIB as a institution's most important and expensive form of transferring operational risk through insurance.

Professional Indemnity (PI) Coverage - Unlike Directors and Officers liability insurance, banks professional indemnity coverage is intended to provide insurance to the bank itself against claims arising from alleged errors or omissions committed by bank's employees and officers in the performance of their professional duties(fiduciary and operations), investment advisory activities, private banking, etc. This is driven by the shift in emphasis away from lending income into income streams generated by fee for service.

Payment Card Coverage - Coverage for losses incurred by banks as the result of counterfeit, forged and or altered payment cards is currently available through most international payment card organizations such as VISA and MASTERCARD. This coverage is designed to address counterfeiting, forgery and or alteration of both the embossed plastic as well as magnetic encoding on the card. In addition, specialised coverage for merchants, banks, processors, and independent service organizations against fraudulent and/or excessive charge baclcs by participating merchants has recently been introduced. Underwriters view the loss, theft, or misuse of cards as a completely uninsurable risk. Therefore, no coverage for this exposure is available in the market.

Given the potential profitability of payment card operations, growing consumer demand for these services, and the potential for enhanced sharing of credit data between Saudi banks, it is inevitable that the number of payment cards in circulation within the Kingdom will increase dramatically in the near term. It is also inevitable that given global trends in payment card, fraud losses to banks will increase substantially. To address this growing operational risk, banks within the Kingdom will need to take a hybrid approach consisting of loss prevention, and regular and self insurance of risk.

Loss Prevention - The payment card industry has found that the most effective way of dealing with card fraud and abuse is prevention. Careful screening of both cardholders and participating merchants, on-line monitoring and analysis of account activity, anti counterfeiting measures, sharing of fraud information among institutions. and aggressive investigation and persecution of abuse has significantly reduced losses on a global basis. As Saudi banks increase their participation in the payment card market, it will be essential that they establish with the assistance of organizations such as VISA International and MASTERCARD International viable and effective loss prevention programs in this area.

Internal Risk Financing - All banks involved in payment card operations must understand that a certain level of loss to fraud is simply a cost of doing business. While loss prevention programs may keep this amount within manageable limits, each institution must establish self insurance mechanisms - funded retention, loss allocation, contractual transfer of risk to address these losses.

External Risk Financing - Due to the relatively high cost and coverage restrictions of conventional insurance, Saudi banks should explore the possibility of using alternative forms of external risk transfer including risk retention groups, risk pooling, and group captives to address the financing of their exposures.

Political Risk Insurance - First written in the early l96o’s, political risk insurance is designed to facilitate stability in international trade and investment by indemnifying certain operational risk associated with political and regulatory activities in the counterparty country. This type of coverage is written by commercial underwriters in the United States, the United Kingdom, and Western Europe. In addition, it is also available through the facilities of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank. Political risk insurance may be written to cover a number or areas:

Confiscation, Nationalization, Expropriation, and Deprivation (CNE&D) This is most commonly purchased form of political coverage. These policies are generally used by organizations with assets permanently located in another country and respond when these assets are taken over by government action.

Contract Frustration - This entails the nonperformance or frustration of a contract with a overseas customer through an invalid action by that customer. This invalid action wrongfully invalidates an overseas transaction in such a manner that the bank is unable to obtain payment for its services or recoup its assets.

Currency Inconvertibility - This type of loss occurs when payment occurs in local currency and the local government is unable or unwilling to exchange the currency at prevailing market rates. This has traditionally been a problem in many developing countries.

Trade Disruption - This types of losses are associated with interruption of trading activities due to war, strike, change in government, or change in law or regulation in the counterparty country. Trade disruption coverage can provide protection not only for the direct loss of revenue associated with the disrupted transactions, but also potential loss of earnings, extra expense, loss of profits, and loss of market.