What does indemnification refer to in asset management?

Indemnification in asset management refers to reimbursement for litigation costs or losses that one party may incur due to claims made against them. It serves as a protective measure, where one party agrees to compensate another party for certain damages or losses that may arise during the course of a business relationship or contract. This concept is crucial in asset management because it helps to mitigate financial risks associated with potential legal actions.

When indemnification clauses are included in contracts, they establish a framework within which the costs of defending against lawsuits or litigations can be handled. This is particularly relevant for asset managers, who may face various legal claims related to their management of investments or properties. Overall, indemnification provides a safeguard that can enhance confidence and stability in financial and operational transactions.