Regulatory investigations across the Asia-Pacific region will become more frequent and aggressive over time, and risk managers in the region that currently do not advise their c-suite to buy any, or adequate, directors and officers (D&O) cover could find themselves in hot water as a result.
Both Hong Kong and Singapore have significantly beefed up their corporate governance, stock market listings and money laundering rules in recent times – and other regional regulators are likely to follow suit sooner rather than later.
D&O claims have rocketed in Australia recently, following regulatory and listing changes. Broker Marsh has reported that there is now a high incidence of class action litigation cases, many of which are securities class actions.
Marsh noted that the average number of securities class action claims lodged per year has risen fourfold in the last decade – equivalent to a 300% increase.
“The growing number of Royal Commissions and other industry inquiries has also put directors and officers under the spotlight. The surge in shareholder class actions has notably made its mark on the D&O liability insurance market and the management of such insurance programmes in Australia,” said Marsh at the end of last year.
Allianz Global Corporate & Specialty (AGCS), meanwhile, carries out an annual analysis of 470,000 global claims and has found a definite increase in D&O and other liability claims in Asia.
“We are not seeing a rise in the frequency of liability claims but the value of claims has been rising, with higher awards and rising legal costs. We are also seeing much larger claims in Latin America and Asia than in the past. Once, nine out of ten of our largest claims globally would have come from the US – now it is more like seven out of ten,” said Peter Oenning, liability claims specialist at AGCS, as the latest report was announced.
Significantly, Berkshire Hathaway Specialty Insurance (BHSI) is growing fast in the Asia-Pacific region and believes D&O is a major demand drive.
It has just launched an enhanced version of its Asia Executive First Directors & Officers Liability Insurance, to include a provision that reinstates policy limits exhausted by the entity or by individual insureds.
“Corporate regulatory investigations have become more targeted and aggressive. As enforcement agencies sharpen their focus, we can expect to continue to see deeper and more costly investigations, often involving multiple individuals,” said Patrick Ko, head of executive and professional lines for BHSI in Hong Kong. “Our automatic reinstatement of limits provision gives insureds confidence that coverage will be there when they need it.”
BHSI’s D&O policy for larger commercial organisations and their directors and officers, now includes an automatic reinstatement provision that applies across the board to all of the policy’s insuring clauses, replenishing limits that have been exhausted by the payment of Side A (D&O indemnification), Side B (company reimbursement) or Side C (entity securities claims) losses for future claims.
“In Asia, there is a heightened focus on ensuring that directors and officers are held personally accountable for their actions. It is prompting companies and board members to examine their D&O coverage and carriers more closely,” said Emily Poh, head of executive and professional lines for BHSI in Singapore.