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Top five risks facing directors and officers

Top five risks facing directors and officers

Top five risks facing directors and officers

Twenty-two per cent (22 per cent) worry about the risks associated with insolvency and corporate collapse. This is the risk where there is most divergence between directors and NEDs, with more than a third of NEDs considering insolvency a significant risk to them.

“This may be because NEDs may feel more removed from the day-to-day workings of the companies on whose boards they sit,” says Barton, “and thus more concerned about their failing.”

Over the years there has been a marked tendency in D&O insurance policies to try to spell out each new embellishment to the product. This has resulted in an insured perils approach to the cover, which has bred length and complexity. It is not unusual for D&O policies to be 40 pages long, with as many defined terms, whereas errors and omissions insurance, a close cousin, is typically half the length.

As the threat of litigation increases, so too does the threat that company executives will be made personally liable. A call to restrict insurers’ ability to refuse a claim based on non-disclosure has grown louder in 2014.

“Directors and senior officers worry they might not have been asked the right questions when the policy was taken out, or that they may not have thought something was relevant that it later turns out should have been disclosed,” says Barton.

Fifty per cent (50 per cent) see this as a major worry, yet we are aware of only very few instances of rescission for non-disclosure involving D&O policies.

“Well-drafted wording should in any event protect innocent directors from the consequences of non-disclosure or deliberate misrepresentation by others,” says Barton. (continued.)

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