A new trade association is developing best practices and offering a certification program for insuring the personal assets of the wealthy and managing the unique risks they face.

The Council for Insuring Private Clients (CIPC), formed last year by Dallas-based insurance exchange MarketScout, in cooperation with insurance carriers ACE, AIG and Fireman’s Fund, will hold its first conference April 9 and 10 in Dallas. The conference, which the CIPC plans to hold annually, will provide wealth managers, estate planners and specialty insurance agents with networking and educational opportunities.

In addition to its focus on insurance best practices, the CIPC plans to develop the training and examinations required for an individual to obtain a new certification to indicate that he or she has the expertise necessary to serve the private-client demographic. The coursework for the Professional Personal Risk Manager designation is expected to be available in late 2013.

“Wealth management used to mean investing in stocks and bonds and doing some estate planning, while insurance was largely ignored,” says MarketScout CEO Richard Kerr. But in the last two years, Kerr has seen a shift in attitude among wealth advisors, who are now taking a much more serious look at asset protection.

Studies show that up to 60 percent of affluent clients who qualify for insurance policies with specialized carriers still have mass-market policies that don’t adequately address the risks they face.

“Advisors who protect the assets of the wealthy need to align themselves with insurance professionals who have specialty expertise. The CIPC brings these groups together to improve best practices,” says Kerr.

One major threat to the well-to-do is being underinsured and/or improperly insured on their properties. As an example of improper insurance coverage, Kerr cites clauses typically found in homeowners’ insurance policies issued in California requiring that brush be cut back 100 feet from residences. “If a brushfire comes and the brush is cut back 30 feet, it’s possible the entire claim could be denied,” he says.

Perhaps the biggest issue for the wealthy is inadequate liability coverage, according to Kerr. “If your client runs over a bus full of kids in his Bentley, it could result in a multimillion dollar lawsuit. The question for wealth managers is, ‘Does the client have adequate liability protection and what’s the right amount? $20,000,000? $50,000,000? Or even more?’”

Advisors who don’t adequately address insurance needs can find themselves with irate clients. As Kerr puts it, “That’s when the wealth manager may lose a great client.”

Advisors who fail to establish adequate insurance programs for their clients risk more than just being fired. They may also be exposing themselves to professional liability claims. To avoid this, Kerr says advisors should affiliate with specialty insurance agents and carriers who can address the atypical risks faced by the rich.