The US state of Delaware has amended its General Corporate Law to permit corporations to use insurance captives to provide coverage for D&O liability.
Open market insurers have generally raised their rates in each of the past 17 quarters for D&O liability coverage. Until today, it was unclear under Delaware law whether a company could purchase potentially lower-cost insurance from its own wholly owned (captive) insurance company.
According to Steel City Re, companies choosing to move their D&O risk to new or existing captives will want to capitalise their insurance firms quickly. It also recommended that those same captives be used at the same time to cover ESG and reputation risk.
In a statement, Steel City Re said: “Parametric ESG and reputation risk insurances are conceptually similar to 1st party versions of D&O liability insurance and Errors and Omissions insurance. Due to trigger and timing differences between parametric ESG & reputation insurance, and D&O liability insurance, the risks are reasonably uncorrelated thus providing good risk balance in the captive.”