The Senior Insurance Managers Regime and the upcoming senior managers regime, for financial advisers, raises the important question of insurance cover for executive and non-executive directors. The same goes for senior managers who are not yet an officer of the company but hold a regulated function, as an employee, and are regarded as managers or senior employees in a managerial or supervisory position. The former should always have Directors & Officers (D&O) cover and there is a conversation to be had as to whether that insurance is held by them personally or in the name of the company. Senior employees are usually covered by the insurance held by the firm because they are “an employee in a managerial or supervisory position”.
However, the precise nature of the cover can often vary as it is always very fact-specific. Nilam Sharma, is an expert on D&O insurance and recently gave an interesting talk demonstrating the many dos and don’ts of obtaining this cover, as well as the extent to which a claim would be considered. Below is a comprehensive checklist of insurances to consider.The list below is divided into two categories. It is aimed, in particular, at new directors. The first section contains insurances which you should ensure that you, or your company, have in place before you accept the position. The second is a list of insurances available which are either tailored towards various industry sectors that you may want to have in place given your specific role. Insurance is not a science, it is an art. And insurers are willing to discuss, in detail, with you what you are looking for and therefore the standard wording for the policies below can be structured to meet your specific requirements.
A. At a minimum
Purchased by your company and designed to pay your defence costs and payments to third parties where you are sued for a loss caused by a decision you made as a director, officer or senior manager. You do not need to be named in the policy.
Employment Practices Liability
Purchased by your company to defend you against employment-related claims made by employees against you as a director or officer of the company.
Purchased by your company to pay for losses arising from cyber-related risks.
B. Other Insurances to consider
Stand-alone Side A D&O
Provides the same protection as the D&O Liability policy above and can be purchased by you or your company as an additional limit of insurance.
Crisis Management Insurance
Purchased by your company to pay damage limitation costs.
Pre-investigation Costs Insurance
Sometimes you or your company may be asked to investigate a potential breach of regulations or a potential liability which does not fall within the definition of a claim under your D&O policy. This policy provides a set amount of costs which allows you to investigate if there is something serious that needs to be reported to the regulators for which you/your company is likely to be liable.
Retired Director’s Liability
While a retired or past director will continue to be an insured under an existing D&O policy even after leaving the company, if the company decides not to continue with a D&O policy, the retired/past director will no longer have insurance in place. This policy can be purchased by the retired director in their own name.