Australian company directors are facing the broadest personal-liability landscape in a generation and to deal with this challenge some underwriters are quietly redrawing their management liability cover offering. The pressure is no longer confined to financial loss and now spans cyber, privacy, workplace conduct and, increasingly, the spectre of employees suing over redundancies driven by the adoption of artificial intelligence (AI).
"There are more regulators coming after directors than ever before, personally making them accountable for what they do," said Adam Suplina (pictured), directors and officers practice manager at Pacific Indemnity Underwriting Solutions. This month, the Sydney-based boutique agency launched an AXA XL-backed management liability product aimed squarely at small and medium-sized enterprises. Suplina said SMEs are dealing with new risks that encompass cyber and cybersecurity, privacy and workplace conduct.
"There are more board-level reviews and operational concerns at that level than purely operational risk these days," he said.
The numbers support Suplina's assessment. In the six months to December 2025, the Australian Securities and Investments Commission (ASIC) took part in court enforcement actions against 51 parties for corporate misconduct, including breaches of directors' duties, according to its latest Enforcement and Regulatory Update. Over the same period, the regulator received 9,686 reports of misconduct raising 13,036 issues - a 28% rise on the prior half - with corporate governance matters accounting for 40% of issues. ASIC deputy chair Sarah Court separately confirmed in November 2025 that the regulator had doubled new investigations and nearly doubled new court matters over the preceding 12 months, naming governance and directors' duties failures among its enduring 2026 enforcement priorities.
Crucially for brokers advising private companies, that reach is not limited to listed boards. ASIC's enforcement extends to every director registered under the Corporations Act, including small private companies that may have assumed they sat below the regulator's radar.
Why the compliance burden keeps climbing
The expansion of directors' duties is a major driver of this reshaped risk landscape. Suplina argued the day-to-day reality of running a board has fundamentally changed.
"It's become more complex to do business and regulators expect stronger board oversight, not delegation," he said. "There are still stricter disclosure requirements for companies to adhere to."
Suplina said work based laws, including regulations around bullying, discrimination and mental health, are some of the challenges companies are facing and these are all more actively enforced than in previous years.
The regulatory changes are a response to society's increasing mental health issues. Workplace mental health is now the fastest-growing category in Australian workers' compensation. Australian workplace mental health compensation claims reached 17,600 in 2023-24, about 12% of all serious claims, a 161% increase over a decade, according to analysis of Safe Work Australia data by consultancy Safetysure. Harassment and bullying accounted for 33% of mental health claims.
The regulatory architecture around those claims is also hardening. Psychosocial hazard obligations are now enforceable across every state and from July 1 2026 NSW businesses must comply with approved Codes of Practice or demonstrate an equivalent standard. This is a significant shift from the previous guidance-only status, according to compliance advisers BlueSafe Online. Directors carry a due-diligence duty that includes keeping abreast of those psychosocial obligations.
For SME directors, the practical effect is that a workplace culture failure can become a personal exposure. That, Suplina said, is why the cover itself had to change.
"You try to provide defence costs for directors when they're being investigated. We're trying to respond to governance-related claims, not just financial loss, which is traditionally what you'd look at," he said.
Management liability insurance is a packaged product combining directors and officers cover with employment practices, statutory liability and crime protection, typically bought by private companies rather than the standalone D&O policies favoured by listed entities. The Pacific Indemnity product advances defence costs within 30 days and covers self-reports and enforceable undertaking expenses – features designed, Suplina said, "to respond early, not just when litigation hits."
The risk no one can price yet
The threat Suplina returns to - and the one he concedes the market cannot yet quantify - is AI.
"The new one is AI," he said. "You're seeing AI replacing employees so there's a potential uptick in employment-related claims with people saying that AI is taking my job."
When an employee is replaced by AI the employer can be legally exposed to unfair dismissal laws if a redundancy is not genuine or proper consultation is skipped. Under section 389 of the Fair Work Act, a redundancy is only genuine where the role is no longer required and redeployment is not reasonable.
"It's a future risk that all insurers are looking at - the uptake of AI and how that impacts staff," said Suplina.
When it comes to dismissals, the bar has risen. According to law firm MinterEllison, the High Court of Australia confirmed in 2025, in the Helensburgh Coal matter, that the Fair Work Commission can conduct an extremely broad inquiry into whether redeployment was reasonable before a redundancy qualifies as genuine. Fair Work Commission lodgements, meanwhile, have climbed from roughly 30,000 a year before 2023 to more than 45,000 in 2024-25, with dismissal claims among the fastest-growing categories, according to commentary from Edwards HR.
For brokers, AI-driven restructures are an example of a fresh seam of employment-practices exposure impacting directors precisely as enforcement intensifies and the cover responding to it is still being written.
