“Corporate Australia could face a future in which D&O (directors’ and officers’) insurance is no longer available or affordable or provides the coverage expected or required.”
That was the warning made by top broker Marsh in its six-page submission to the Parliamentary inquiry on litigation funding and the regulation of the class action industry. In fact, Marsh expects the D&O insurance market to keep hardening over the next 12 to 18 months not only in Australia but globally.
Marsh said the management of D&O insurance programmes has been impacted by the surge in securities class actions. In the broking giant’s view, the D&O insurance market is caught in a perfect storm – given the “greater (and unprecedented) risk, significantly higher premiums, notably lesser and more onerous coverage, punitive retentions, and historically lower limits.”
According to Marsh’s data for the first quarter of the year, the average rise in premiums was 225%, with some even soaring by as much as 500% for the biggest firms listed on the Australian Securities Exchange. It’s also been highlighted that some directors have already opted to resign on account of potentially insufficient protection for liabilities associated with their directorships.
“Left unchecked, the combination of class action lawsuits, litigation funding, and massive D&O premium increases could have serious implications for the Australian economy,” commented Marsh’s Craig Claughton, financial and professional practice head in the Pacific, on their submission.
“Without significant reform, such as addressing the continuous disclosure regime, corporate Australia may not be able to attract or retain the qualified directors it needs.”