A survey released by reinsurance broker McGill and Partners suggests that an overwhelming majority of board directors questioned fear the ‘personal ramifications’ of a regulatory investigation.
The survey was reportedly conducted by NEDonboard from a sample of 97 board members. McGill and Partners reported that directors were ‘increasingly concerned’, despite offering no statistics comparing these results with past ones. It was also not clear who the 97 board members or their companies were.
Just under half of respondents (47%) reported that a regulatory investigation was their company’s biggest risk exposure.
Noona Barlow, partner and head of financial lines claims at the broker, said: “It’s vital that directors understand what their D&O policy covers. All too often, they simply aren’t aware, and can find themselves personally liable and facing significant costs. While directors may expect their company to protect them in case of regulatory investigation, the company’s interest may no longer align with its current or former directors and therefore access to the D&O policy is vitally important.”
The company outlined how D&O policies would cover some costs, but not if there was an admission of guilt from a director being investigated.
Barlow added: “There are steps that directors can take to minimise the risk of being implicated in an investigation. As a priority, ensure that all business decisions are documented at board meetings, and that any objections to decisions are recorded in the minutes. The value of having a D&O policy is that it provides directors with the ability to defend themselves against charges. However, it’s vital that every director understands what their policy includes, the limits, how to access the policy and how to report a claim. To find out this information, speak to your company’s risk manager or the insurance broker.”