Family-owned businesses, particularly small and medium-sized enterprises, are the real driving force behind a country’s economic activity and a key pillar of its economy.
In Spain, according to data from the Family Business Institute (IEF), these companies account for no less than 92.4% of organizations and support 7 out of every 10 private-sector workers. In Latin America, studies conducted by universities across the region and networks such as the Iberoamerican Academy of Management confirm that family businesses account for more than 85% of all companies and generate 60% of regional GDP.
These figures highlight their importance and the need to protect them. For this reason, having an appropriate insurance strategy is essential to safeguarding assets, ensuring business operations, and securing the continuity of these businesses.
Protecting family assets
Whether it is an SME in Madrid or Barcelona, or a corporation in Mexico City, in many family-owned businesses, the line between the personal assets of the founders and those of the company can be blurred. In such cases, if owners or directors make a serious error or face a claim, their personal assets – their home, savings, their children’s future, and so on – may be put at risk.
Indeed, under current Spanish legislation, including the Capital Companies Act and insolvency regulations, directors’ liability has become significantly more stringent. Likewise, in countries such as Mexico, Colombia, Chile, and Peru, corporate governance regulations and requirements imposed by local regulators are also becoming increasingly stringent.
To mitigate the impact of these situations, there are insurance coverages that act as a protective buffer. These include various forms of liability insurance, such as directors’ and officers’ liability (D&O) policies, general liability, employers’ liability, and product liability. These policies protect family members’ personal assets against claims arising from errors or negligence in the management of the business, workplace accidents, the launch of a defective product on the market, or other third-party claims.
Ensuring continuity and succession
Another major risk for a family-owned business is often its reliance on key individuals, such as the founder. In such cases, it is advisable to take out key person insurance, also known as key man insurance. These life insurance policies cover employees who are essential to the operation and continuity of the business. They provide cover in the event of their death, serious illness, or incapacity. This enables the business to absorb a loss of income while it is reorganized, cover the costs of recruiting and training a successor, mitigate any disruption to its operational or commercial activities, and ensure that plans and projects can continue. This provides reassurance to successors, other shareholders, and employees.
The compensation can provide immediate liquidity to pay inheritance taxes, avoiding the need to sell assets of the company to cover these costs. This ensures a smoother and less disruptive transition between generations.
Operational stability in the face of unforeseen events
Operational crises can destroy in days what took generations to build. Multi-risk insurance protects physical assets – buildings, machinery, stock, and equipment – helping to ensure business continuity in the event of unexpected incidents such as fires, theft, or vandalism.
In addition, business interruption insurance provides a financial lifeline for a family-owned business when a major insured event forces it to suspend its operations. While other policies may be limited to repairing material damage, this cover compensates for lost income and helps to meet ongoing fixed costs. In this way, it helps prevent a temporary setback from turning into permanent insolvency due to a lack of liquidity.
Today, some form of protection against cyber risks is also essential. A ransomware attack, for example, can bring operations to a standstill and cause irreversible damage to the family brand.
Insurance as part of the family business protocol
Within family-owned businesses, insurance is therefore a fundamental part of how the business operates. It addresses a range of risks, from protecting directors and officers against liability to providing coverage for unexpected contingencies.
While insurance cannot prevent unforeseen events, it can ensure that, when adversity strikes, your business and your family have the protection they need to safeguard their assets and peace of mind. What makes these coverages particularly valuable is their ability to protect the family legacy.
At Mapfre, we have spent years alongside such companies, protecting their assets and ensuring their continuity. We understand that behind every project lies a compelling story, a strong commitment, and a promising future.
