Companies seek directors' cover

A Financial Times article by Andrea Felsted, Insurance Correspondent
Published: January 21 2005 02:00

At least 30 per cent more UK companies were expected to get insurance to protect directors against the consequences of possible errors this year, a report from Heath Lambert, the privately owned insurance broker will say today.

Simon Twitchett, head of Heath Lambert's directors' and officers' practice, said corporate scandals, increased regulation and greater attention to corporate governance were driving companies' demand for so-called directors and officers cover. The cover provides protection against wrongful acts alleged against company directors.

Mr Twitchett said: "People did not get fined for speeding when there were no speed limits. The more laws you bring in, the more people can be held personally accountable."

He said Royal Dutch/ Shell's overstatement of reserves as well as events at Parmalat were expected to result in claims under directors' and officers' policies.

Mr Twitchett said forthcoming changes to the Companies Act, allowing directors to be reimbursed for the expenses incurred defending actions brought against their companies, as well as moves to limit auditors' liability, were also focusing minds.

Pharmaceutical companies were having to pay more for cover, or might find it difficult to acquire the level of cover they required because of concerns about potential litigation.
Mr Twitchett said an increase in capacity meant prices for directors' and officers' cover were more competitive.

While larger companies with US exposure might see modest reductions in premiums, depending on their circumstances, medium-sized companies could see reductions of 30 to 40 per cent in the cost of their directors' and officers' cover.