Directors and officers of big and small businesses and organisations are facing hefty increases for liability insurance.
A report by the Institute of Directors (IoD), Dentons Kensington Swan and Marsh NZ says global and local influences, including increased community expectations, regulatory requirements and a need for greater transparency around culture and wider environmental performance were driving up the cost of directors & officers (D&O) liability insurance.
Steve Walsh of Marsh NZ said the insurance industry was factoring in expectations about how climate-related disclosures will drive broader environment, social and governance (ESG) reporting requirements for a range of organisations.
Culture, conduct, cyber, climate change, and Covid management
“We are seeing increasing global scrutiny of climate action, environmental impacts and a demand for sustainability reporting more generally from investors and governments,” Walsh said.
“This is causing the insurance industry to take a cautious approach to D&O insurance and to seek more information from companies before setting policies.”
Class actions increase
Dentons Kensington Swan’s David Campbell said the evolving class actions regime and the growth of the third party litigation funding market in New Zealand, were some of the matters driving uncertainty.
“Companies seeking to obtain insurance cover for directors in the face of new and evolving areas of risk need to navigate this rising sea of change,” Campbell said, adding that coverage levels had to be future-proof as some litigation can drag on for years.
In the meantime, premiums were rising.
Walsh said public listed companies saw D&O insurance premiums increase an average of between 30 and 50 percent in 2021.
Patterson said the increases were bigger for dual listed public companies in New Zealand and Australia had seen premiums rise 250 percent.
She said there had also been a 6 percentage point increase in the number of companies carrying D&O insurance to 85 percent.
“That means there’s still some boards and companies out there with no D&O cover in place. So that’s really of concern.”
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