D&O insurance structure
The structure of a D&O insurance policy depends on which of three insuring agreements are purchased (ABC policies are generally chosen, as these are standard form policies for publicly listed companies. For private or non-profit companies, only AB policies would be used) [see table].
Directors and officers are confronted with an increasing peril that their company may not be able to reimburse them for loss. An extra layer of defence to personal funds can be secured by purchasing Side A cover, which insures directors and officers only (not the company) when indemnification is unavailable.
Often, not enough coverage is bought for the risk, so a major trend is for more Side A cover to be purchased in order for an individual officer to protect personal assets. D&O cover has become a regular cover for large multinational companies, but all sizes of organisations – public, private or non-profit – have potential exposures.
There is increasing demand for SME D&O cover, though penetration is still low due to lack of awareness and education. D&O products are perceived to be expensive, but actually are quite affordable. For example, a small firm with a £100m turnover can obtain no-frills D&O cover with very low limits for less than £1,000 per year.
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Who is covered?
- Past, present and future directors
- Non-executive directors
- Employees in a managerial or supervisory capacity
What is covered?
- Allegation of a wrongful act
- Costs and expenses of an insured e.g. defence costs
- Financial losses where the insured is held liable
Who is covered?
- Stockholders, investors, creditors, banks
- Supervisory board
- The company itself, employees
- Regulators, state authorities, unions
- Customers, suppliers, competitors
Any questions? Please don’t hesitate to contact one of our team.
Matthew.collins@ascendbroking.co.uk | Office: 01245 449060
