Because its beginning approximately 50 years ago, D&O insurance has developed into a family of products responding otherwise to the requirements of publicly traded companies, privately held companies and not-for-profit entities and the respective board members of theirs, trustees and officers.
Directors’ & Officers’ Liability, Executive Management or general liability insurance are basically interchangeable terms. Nevertheless, definitions, insuring agreements, exclusions and coverage options vary materially based on the kind of policyholder getting insured and also the insurer underwriting the risk. Executive Liability insurance, once regarded as a need exclusively for publicly traded companies, especially on account of the exposure of theirs to shareholder litigation, is now recognized as an important component of a threat transfer program for privately held not-for-profit organizations along with companies.
Optimization of safety is a common goal shared by all kinds of businesses. In the opinion of ours, the most effective way to attain that objective is through engagement of professional insurance, financial and legal advisors that are working collaboratively with management to constantly evaluate and deal with these special enterprise risk exposures.
Private Company D&O Exposures
In 2005, Chubb Insurance Group, among the biggest underwriters of D&O insurance, conducted a survey on the D&O insurance buying trends of 450 private companies. A considerable portion of respondents provided the following factors for not purchasing D&O insurance: • didn’t see the demand for D&O insurance, • their D&O liability danger was minimal, • thought D&O risk is included under some other liability policies
The companies responding as non purchasers of D&O insurance encountered a minimum of 1 D&O claim in the 5 years preceding the survey. Results showed that private businesses with 250 or maybe more workers, had been the topic of D&O litigation during the preceding 5 years along with twenty % of businesses with twenty five to forty nine employees, experienced a D&O claim.
The survey revealed 43 % of D&O litigation was brought by customers, twenty nine % from regulatory agencies, along with eleven % from non publicly traded equity securities holders. The typical loss reported by the private businesses was $380,000. Companies with D&O insurance experienced an average loss of $129,000. Companies with no D&O insurance experienced an average loss of $480,000.