Need for D&O insurance set to increase in China, Brazil and Canada

Although the US and UK reflect more established and tougher landscapes for D&O liability and mature markets for D&O insurance purchases, China, Brazil and Canada are examples of countries where the scrutiny of D&Os is increasing and insurance protection both locally and globally is prudent, according to a new report from P&C insurer Chubb and international law firm Clyde & Co.

The Emerging Multinational Management Liability Risks report, launched at the FERMA Forum 2019 in Berlin yesterday, states that multinational indemnification and insurance arrangements should be regarded as “part of the package” as much as salary and other benefits.

“Directors have to take a more active role in the purchasing decisions involving insurance for the protection of their personal assets,” it states. “In particular, independent (non-executive) directors working with their corporate colleagues need to ask whether personal asset protection is on par with the protection provided to corporate (executive) directors. They should also ask whether there are appropriate local insurance policies available for purchase so that the protection is afforded to them independent of any obligation that the corporation has or doesn’t have to them.

“The risk of liability for independent directors arguably now outweighs their level of reward, and so they have a particularly acute interest in ensuring they are properly protected, as well as their corporate counterparts.”

The report states that when designing and implementing a multinational insurance programme that insures the risks of D&Os in international jurisdictions, clients, brokers and insurers should be aware of how D&O insurance is structured and whether such a structure will meet the needs and expectations of a company’s D&Os around the world.

“Buyers and brokers of any multinational programme should work with a global insurer and independent financial, legal and tax advisers that maintain a local presence in the major jurisdictions where the multinational enterprise has interests,” it states. “Multinational insurance buyers also need to understand the structure of their enterprise and the impact such structure has in connection with insurance protection.”

Kyle Bryant, head of financial lines for Chubb in Continental Europe and co-author of the report said: "Companies and their directors and officers are under scrutiny wherever in the world they operate. This report demonstrates how important it is for global businesses to work with a multidisciplinary team of experts which can analyse the evolving threat landscape and regulatory regimes. This is also the starting point for building an effective multinational management liability insurance programme."

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