Directors & Officers Liability Insurance: UK Market Trends
Directors & Officers liability insurance (D&O) helps to protect company directors and office-holders from the potentially ruinous cost of regulatory action or litigation, which can occur even when they are not at fault. The legal bills that can arise from refuting claims or responding to regulatory enquiries can be steep, and in some cases have to be covered from the director’s own pocket – which could have a devastating effect on their own personal finances.
What does D&O insurance cover?
D&O policies protect directors and officers against the significant liabilities inherent in their roles. They will cover the considerable cost of civil litigation, regulatory enquiries and criminal proceedings, up to the policy limit. There are several types of D&O cover, the simplest of which will cover the director’s personal assets, while more extensive policies will cover the company’s costs associated with indemnifying directors, for example legal defence costs and settlements.
D&O insurance Policy Sections
- Directors & Officers Cover: This section can protect the personal assets of directors/officers where the company isn’t able to fund indemnification costs.
- Corporate / Entity Cover: This section can protect the company, reimbursing it for costs associated with indemnifying directors, for example the payment of legal fees on their behalf.
- Employment Practice Liability Cover: This section can protect employing directors and officers against the many potential claims under employment laws.
Trends in the D&O insurance market
The D&O market is currently in a state of flux, with directors increasingly being held personally liable for their actions and decisions. This is due in part to a heightened focus on corporate social responsibility, leading to more regulatory scrutiny of directors’ actions and decisions and increased personal accountability. It is also a result of modern global trading, with globalization opening directors and companies up to a range of overseas risks, and the rise of technology exposing them to slew of new risks relating to cyber and data security, for example.
In the UK, the introduction of anti-corruption laws in 2010 has led to a sharp rise in bribery and corruption claims against directors and officers, compounded by aggressive regulatory enforcement within the UK and abroad. Under UK law, bribery encompasses a broad spectrum of activities that extend far beyond the simple payment of bribes, for example awarding contracts, making charitable donations or gift giving, all of which directors can be held personally liable for. The 2010 laws also make directors personally responsible for the corrupt actions of third parties, for example suppliers or subcontractors. This means that a UK director could be taken to court for bribes paid by a third party if they are judged to have been made on the company’s behalf.
Pressure on premiums
The result of increased director liability has been a sharp rise in claims and thus a general trend towards the upward revision of premiums as insurers attempt to accommodate the heightened risk.
One major global D&O insurer AIG, advise that D&O premiums have been steadily rising across the globe since the third quarter of 2018, while insurers have also been requesting higher excesses and placing limits on cover.
In spite of this, comprehensive cover is still available on the market, and this is where BJP can help.
Assessing your D&O insurance
With the number of risks to which UK directors and officers are now exposed, it’s important to be proactive in your risk management practices and to undertake a detailed check of your current policy to ensure you have adequate cover for both your and your company’s liabilities.
If you don’t currently have Directors & Officers liability cover and would like to look into it, please contact us on 01189792121 or email firstname.lastname@example.org and we’ll be happy to help you find the right cover at the right price.