D&O cover fails to provide executives required protection – Marsh

Directors and officers (D&O) insurance products may not provide executives with the protection they now require because of changes in the way companies and authorities interact, says to Marsh.

As regulators and prosecutors increasingly seek to hold individuals in senior management personally accountable for ‘corporate wrongdoing,’ there is increased pressure for companies to investigate internal conduct and report any findings to authorities.

Companies that co-operate in this way may be able to enter into agreements that reduce or remove corporate liability for reportable conduct. While this co-operation reduces the company’s liability, individuals may be left exposed to criminal charges and regulatory discipline.

Marsh has enhanced its D&O insurance offering, Marsh Alpha, in response to the new and emerging legal and regulatory risks facing directors and officers.

Marsh Alpha now includes broad investigation insurance, including cover for purely internal investigations; a broader definition of non-indemnified loss; and terms that permit the submission and review of defence expenses to insurers, without compromising the insureds’ privileges, which could prejudice them in the underlying action.

Leslie Kurshan, head of product development for the financial and professional (FINPRO) practice at Marsh UK, explained: “The questioning of the legality of the conduct of executives now proceeds differently than it has in the past. Increasingly, investigators working for the company gather evidence on the conduct of its employees, directors, and officers in co-operation with regulators and prosecutors, or in anticipation of reporting the conduct to them to head off a more formal enforcement agency inquiry.

“Traditional D&O liability insurance policies provide cover when a legal proceeding is served, or a formal investigation commences, but generally include few scenarios where an individual is investigated by his or her own organisation. In the current environment, individuals may need legal assistance before these traditional policies would respond.”