What is Directors & Officers Insurance?
Directors & Officers Insurance (D&O) policies insure against hostile actions by third parties (such as official regulators, customers, receivers, or administrators) or indeed by their own company. It pays for external counsel fees to defend a director or officer in such actions, as well as damage awards and settlements as long as no fraudulent behavior is established against them.
Does my company need a D&O policy?
Any organization with Board Members, Directors, and Senior Management should have a D&O policy in place to protect their business. Whether you are a local SME, charity, voluntary association, membership organisations, and international corporations, you could be susceptible to a claim. D&O insurance is also essential for financial institutions such as Asset Managers, Hedge Fund Managers, Private Equity Firms, Venture Capitalists and Banks. Since the Global Financial Crisis, tougher regulation and scrutiny on directors and officers has been significant and exposure to allegations and actions can have a grave effect on Management.
You’ve never had D&O, so why take the insurance now?
Directors’ exposures have been highlighted by a tougher legal environment since the global financial crisis with more regulation and scrutiny than ever before. As a result, claims against Directors in the MENA Region are now at a record high and involve companies of all sizes and sectors.
Defending actions and allegations, even unfounded ones, can be very time-consuming and stressful. An adverse finding and disqualification can have grave consequences for future career prospects, while any appeals process can only extend the timeframes and the uncertainties. Meanwhile, the direct financial damage from loss of earnings and loss of assets, and the resulting lifestyle impact can be devastating.
Examples of when claims could arise:
- Criminal action by a state criminal prosecutor
- Investigation by a regulatory authority
- Investigation by an antitrust division
- Investigation by an antitrust division of the US Department of Justice (for a US subsidiary of a MENA company)
- Alleged breach of fiduciary duty brought by insolvency trustees
- Mismanagement and asset stripping
International Business Exposures
As businesses become more international due to globalization, Directors and Officers should be aware that claims in some international courts, such as the UK and USA are increasingly common and even where such courts can be persuaded to decline the jurisdiction, legal costs will be incurred in preliminary hearings to challenge this jurisdiction.
Also, laws set by a foreign country can have far-reaching consequences. For example, the UK Bribery Act – which is applicable to English Directors in the UAE even if they are not specifically working for an English company – the Directors must comply with the provisions of the Act.
How much does Directors & Officers Insurance Cost?
The cost of Directors & Office insurance depends upon many factors, including company size, sector, turnover, liabilities, numbers of directors and officers, location and structure of the company, and much more.
Given that claims against directors and officers in the MENA region are at an all-time high, it is worth getting a quote to see how much it would be to ensure your senior directors and officers are protected.
How do I buy D&O Insurance?
For us to approach the market on your behalf to obtain D&O quotations, we will require you to complete an industry-specific proposal form with all the details of your Directors & Officers to be covered under the policy, along with a valid Trade License and three years audited financial statement.
An experienced insurance broker such as the team at Beneple will be able to guide you through the process and provide you with the most competitive and relevant quotes for your situation.
You can find further information here.