PSD2 Safeguarding - insurance option

Authorised Payment Institutions (APIs), Authorised E-Money Institutions (EMIs) and Credit Unions that issue e-money have a responsibility under the Payment Services Directive II (PSD2) and Electronic Money Regulations (EMD) to protect customer funds in priority to other creditors if they become insolvent. This is known as ‘Safeguarding’ and the regulations offering two different Safeguarding methods: 1) segregation; or 2 using an insurance contract or comparable guarantee.  

PSD Bond is the first and, we believe only, insurance contract that meets the requirements of the PSD2 and EMD. Pioneered by Protean Risk, the insurance contract is underwritten by major insurers, including Lloyd's of London, all providing Standard & Poor’s or equivalent ‘A’ rated financial security. It was launched in the UK mid-2019 and has since been accepted for use in Lithuania.  

Deploying PSD Bond as an alternative or complementary method of Safeguarding delivers multiple benefits to APIs and EMIs including reducing their risk and the costs of capital associated with Safeguarding client funds in segregated accounts. It’s equally proven to be financially competitive when compared with bank guarantees.  It’s why it is being adopted by a growing number of firms in the sector including some of the best known brands.  With our experience of the Payments sector and Safeguarding, we can answer questions you may have, help you identify the benefits and guide you through the regulatory process to successfully deploy the insurance method.