Growth in Prepaid Cards also means increased exposure to fraud. 

Read more to find out about ASR’s Prepaid Card Fraud Insurance Program.

In our fast moving, technology driven society, prepaid and stored value cards are a vital component of the payment industry. While usage continues to grow rapidly, the unfortunate consequence of this is increased incidents of card fraud. Financial institutions that issue these cards - as well as companies that provide processing, marketing and other services to the industry – are increasingly exposed to significant risk from card fraud.

American Special Risk’s Prepaid Card Insurance Program allows companies that operate in this market to withstand the potential onslaught of fraudulent bankcard activity by providing coverage for losses from amounts that are not recovered or recoverable from cardholders and merchants due to Transaction Fraud/Over & Under Floor Limits as well as Funding/Load Fraud events.

Coverage Highlights

• Covers negative balances resulting from card transactions that are not recovered or recoverable from the cardholder or merchant. Includes Funding/Load Fraud and Transaction Fraud/Over and Under Floor Limits.
• Broad definition of prepaid card, including Payroll, Gift, Stored Value, Health Care, Travel, Money Transfer and General Purpose/Debit Cards.
• Option to extend coverage to the issuer’s Independent Sales Organizations.
• Worldwide coverage - Losses can occur anywhere in the world.
• Coverage for loss sustained by the unauthorized use of a prepaid card to access an electronic terminal such as Point-Of-Sale terminals (POS) and Automated Teller Machines (ATM).
• Coverage includes fraudulent use of a prepaid card in an Internet transaction, regular mail or telephone transaction (e.g. "card not present" transaction).
• Coverage is customized to meet the unique requirements of each business, with several premium and deductible options.
• Security – program is insured by leading insurers with “A” financial security ratings from both A.M. Best and Standard & Poor’s.

• All financial institutions that issue bank cards and accept liability for fraudulent card transactions.
• Card processors that accept liability for fraudulent charges.
• Card Networks.
• Independent Sales Organizations that market and manage card programs.
• Miscellaneous entities that accept liability for fraudulent card transactions.

The program is available to all companies, with a particular focus on Financial Institutions, card processors and companies that market or manage prepaid card programs. Those interested in learning more about the program should contact American Special Risk.

If you own ATMs or sponsor entities that do, you are at risk for losses from fraudulent activity.

Read more to find out about ASR’s Sponsorship Liability Insurance Program.

In the U.S., all entities that wish to have transactions processed through the card networks must be sponsored by a financial institution that is an approved network member.  For example, an ISO that owns a fleet of Automated Teller Machines and Point of Sale terminals must be approved and sponsored by a sponsoring financial institution in order to have transactions processed through the Visa network.  The network requires that the sponsor banks perform a high degree of due diligence on the sponsored entities and they hold the sponsor banks strictly liable for any breach of the network rules.

The main concern of the sponsor banks involves their sponsorship of an entity that deploys a terminal that is used to facilitate a fraudulent transaction.  Most fraudulent card activity involves some type of “skimming” device attached to an ATM/POS terminal that is used to capture card data.  The individuals perpetrating this crime also obtain PIN numbers, and then reproduce the fraudulent cards and make illegal transactions withdrawing funds from the victim’s bank account.  Historically, card fraud has largely been limited to bank-owned ATMs with the ensuing loss falling almost entirely on the bank or card issuer; however, with the growth of independently deployed ATMs, non bank-owned ATM and POS devices are being used as the point of compromise to capture card data.  The potential therefore exists for legal action to be brought against the sponsor bank and/or its sponsored entities alleging failure to perform adequate due diligence in allowing a terminal into the network, causing them to be in breach of network rules. 

Coverage Highlights

• Insurance for claims made by 3rd parties (typically an issuing bank) resulting directly from a fraudulent electronic fund transfer/sponsored transaction. 
• Defense/Claims expense coverage included.
• Network Fines and Penalties coverage.
• Coverage is customized to meet the unique requirements of each business. Pricing is typically a percentage of total number of sponsored transactions. SFI’s risk management and underwriting procedures, in addition to insurance limits and deductibles, are used to tailor each policy.
• Security – program is insured by leading insurers with “A” financial security ratings from both A.M. Best and Standard & Poor’s.

• All financial institutions that sponsor ATM or POS card transactions.
• Sponsored entities such as Independent Sales Organizations and card processors.
• Card Networks.
• Miscellaneous entities that have liability for fraudulent card transactions.

Those interested in learning more about this innovative program should contact American Special Risk.