D&O Cover Sees Rising Demand

The demand for the Directors and Officers (D&O) insurance cover has increased due to some of the recently reported cases of bankruptcy and fraud. One of the recent cases is of a financial institution where former directors were made responsible for the financial crisis leading to a loan default.

To protect themselves from managerial decisions that can have adverse consequences leading to expensive litigation, more companies are now opting for Directors and Officers (D&O) insurance cover.

The D&O cover offers protection against legal claims as a result of a breach of duty by its directors and officers. The legal liability under the policy includes costs to defend any civil or criminal action.

Considering the shareholder activism is on the rise the insurance provides much-needed protection to companies, as it covers the action brought against the top management by a range of people including shareholders, employees, customers, competitors or members of the public or even regulatory authorities.

The D&O cover became very popular after the fraud was reported at Satyam in 2009. Since then companies have been increasingly opting for the cover as it not only protects their directors and officers but also the company itself. Moreover, under the new Companies Act, all listed companies are required to have a D&O policy.

IFFCO Tokio has a D&O policy that covers civil and criminal actions against directors and officers. The policy offers the following features:

UNIQUE FEATURES OF IFFCO TOKIO’S D&O POLICY

• Public relations cover of £ 150,000 in addition to the limit of liability
• Additional limitations of liability for non-executive director
• Lifetime cover for retired directors
• Bribery proceedings
• Mitigation cost
• Carve-back for failure to supervise