D&O liability concerns driven by cyber threats: WTW

Directors and officers ranked economic and cyber risks as the top concern for their business operations, according to a global survey by WTW and Clyde & Co, with regulatory and legislative change entering the survey for the first time in third place. Geopolitical risks also climbed the liability rankings from sixth place to fourth, ahead of climate change, which dropped from fifth place to seventh.

WTW said inflation and recession were key drivers for economic risk, ranked as the top liability at 63%, although down from 71% in last year’s Directors’ and Officers’ Liability Survey. Cyber risks followed a close second at 62%, also down since last year’s 67%, with data loss and ransomware lead cyber concerns.

Covering the UK, Europe, Australasia, Latin America and North America, WTW’s survey found regional differences, with economic risks the number one threat to business operations in all regions except North America and Australasia, where cyber risks led in both. In the UK, climate change was ranked as the third concern for business operations and it was fourth for Australasia, but WTW noted climate change has fallen across the board, with the most significant drops in Europe and Asia.

Asked about the top seven risks facing directors and officers financially or reputationally, WTW’s survey found cyber, data loss and cyber extortion dominated. Some 62% of directors cited cyberattacks and data loss as the most significant risk. Cyberattack was the number one for directors and officers in all regions except the UK, where climate change led, and Latin America, where data loss was the number one risk. Cyberattack was also the top threat for directors and officers of all sectors, except healthcare, which was dominated by data loss, and energy and utilities where climate change led.

Some 47% of directors and officers reported a rise in premiums charged for their liability cover, with 31% expecting further increases next year. WTW said 19% of directors surveyed did not know the extent of indemnification provided by their firm. Some 74% of European respondents said their firm’s D&O policy covers cybersecurity risks but it did not appear in the top seven areas of insurance coverage for UK directors.

Jeremy Wall, head of global FINEX, WTW, said: “With a volatile business environment resulting from the current geopolitical uncertainty, it is no surprise that geopolitical risk is rising on the list of directors’ concerns. The advent of technology ensures that cyber will continue to be of major concern and we are certainly seeing more demand for cyber insurance as a result.”

James Cooper, partner, head of insurance, Clyde & Co said: “While the survey highlights geographical variations, it also sheds light on marked differences between how directors and risk managers at small companies are rating risk compared to those at large enterprises. But regardless of business size, successfully navigating risk has never been more difficult. Directors need a forward-looking view, to anticipate threats and challenges.”