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Against a backdrop of increasing regulation and litigation, liability insurance for directors and officers (D&Os) has become essential in recent years. In addition to the changing regulatory landscape, the types of claims levelled against D&Os have also evolved. No longer restricted to just financial misconduct, D&Os are facing unparalleled levels of scrutiny. The #MeToo movement, shareholder activism, cyber attacks and corporate social responsibility are just a few of the issues of which D&Os must now be mindful. Failure to grasp the importance of these issues and their associated risks can lead organisations to purchase inadequate coverage.

UNITED STATES

McKool Smith

“There are several key factors driving personal risks facing directors & officers (D&Os) in today’s market. First and foremost is the omnipresent risk of liability for alleged misconduct of which D&Os are not aware but are sought to be held legally responsible for solely by virtue of their status of as a D&O – this has been the animating risk of D&O insurance from the outset. Contrasted with traditional liability insurance, there is a multiplying factor to D&O liability exposure because, in many instances, there is liability imposed by government investigation or action, as well as follow-on civil litigation by shareholders for the same alleged conduct.”

UNITED KINGDOM

Willis Towers Watson

“Traditionally, directors and officers (D&Os) have been most at risk from shareholder claims alleging wrongful acts and financial mismanagement. More recently, the risks have broadened into new areas, moving away from the confines of financial misrepresentation. Examples of the new risks include the implications of the high-profile #MeToo movement, climate and environmental issues, the Australian Royal Commission, increased regulation, the opioid crisis, vaping and airline crashes.”

SPAIN

Aon Risk Solutions

“There is a wide range of risks, but we can highlight regulatory actions that are focused on anti-corruption and money laundering practices, as well as the proper implementation of corporate policies within companies. On the other hand, one of the most volatile risks for D&Os today is the political-economic factor. This is an external factor that cannot be controlled, but it is impacting globally, such as Brexit in Europe, tensions in the Persian Gulf, the trade war between the US and China, and riots in Hong Kong.”

SWITZERLAND

Lehmann & Waldburger

“Traditionally, liability risks for D&Os in Switzerland only materialise once a company goes bankrupt. There are two procedural reasons for this. Creditors have no legal standing to sue the D&Os of an up and running company. And shareholders, as the second potential source of danger, usually lack the incentive to lodge a lawsuit, as they may only sue for damage payments to be paid to the company. This is, of course, unattractive, looking at the costs, risks and nuisance of a lawsuit to be borne by each potential shareholder-claimant individually.”

ITALY

PG Legal

“The daily challenges faced by directors and officers (D&Os) are increasing and so is their risk exposure. Key factors driving increased risk include growing corporate governance, in particular in the areas of data protection, anti-money laundering (AML) and employment practice and cyber risk, the rising awareness of shareholders resulting in responsibility litigation, increasing class action activities, more frequent merger and prospectus objections and intensified activity among regulatory authorities in the EU and elsewhere.”

HONG KONG

AIG

 “The Hong Kong D&O market is driven primarily by the regulatory environment. Regulatory scrutiny manifests itself as a by-product of economic volatility and emerging market risks that could ultimately impact stakeholders, including shareholders, creditors and customers. Hong Kong is a market where class action law does not exist. Regulators are keen to protect the interests of stakeholders due to Hong Kong’s importance as an international finance hub. This was demonstrated in 2019 with the Securities & Futures Commission (SFC) showing increased interest in listed companies.”

CONTRIBUTORS

AIG

Aon Risk Solutions

Lehmann & Waldburger

McKool Smith

PG Legal

Willis Towers Watson