This was the sobering news given at a recent WOBChat (free for WOB members) from executives at Honan, an Australian insurance and risk advisory service. Guests heard that it is very much a seller’s market for D&O Liability with 2020 providing the toughest market conditions on record, with the average D&O spend for listed companies up by +175%. This is on top of large increased in 2018 (+88%) and 2019 (+75%).
Litigation funded class actions, event driven litigation (cyber-attacks, sexual harassment, environmental disasters etc) and insurers exising the Side C market are blamed for the price hikes. Coupled with the world’s most litigious corporate environment, things are looking tough for Australian directors and officeholders.
Insurance is complicated, but essential D&O cover comprises three parts:
- Side A insurance protects past and present directors and executives;
- Side B insurance protects the company for their liability to indemnify their directors; and
- Side C cover protects the company for claims made against it and its D&Os.
What does this mean for the NFP sector?
While NFPs are exposed to fluctuations in the D&O insurance market, it really comes down to the size of their operation. In its D&O market cap report global insurer Marsh, said that conditions had been “particularly harsh” for larger non-profit organisations, and premiums had risen on average between 70 per cent and 100 per cent. This has led to some NFP’s not renewing D&O insurance, which is placing directors at risk.
If you are serving on a board, then pay close attention to your insurance renewals – particulary D&O and the fine print. Honan recommends NFP board members should have a Deed of Indemnity with the organisation on which they serve. A Deed of Access, Insurance and Indemnity is an agreement between the company and a director or company officer that provides:
- access to company documents which the company must maintain and the D&O insurance policy;
- an indemnity for the directors and officers to the extent permitted by law; and
- the benefit of D&O insurance that the company must arrange on their behalf and pay for the premium.
Individual D&O insurance is another option to consider - if you can find it anywhere. WOB was able to offer members access to great individual insurance product called Passport D&O (Imalia) - which is on hold due to underwriter issues.
Watch or Listen to the WOBChat recording
WOB Full / Corporate and Global members can listen to this great WOBChat and access the notes via WOBShare, our online member forum here.
Find out more about WOBShare here.