As the personal exposure and accountability of directors grows there is a pressing need for companies to reassure their officers that they have access to D&O cover which is clear, responsive and supportive to the individuals concerned.

Where the company has multinational operations the ideal is to arrange cover on a single worldwide form with a reputable international carrier and to contain the overall premium cost by making the global programme subject to an aggregate indemnity limit.

As Paul Edmondson and Stephen Tester of CMS Cameron McKenna and John Hopper of AIG pointed out at AIG’s recent Annual Corporate Governance Seminar this ideal is frequently not achievable because of a complex web of sometimes unclear or contradicting local regulatory and statutory regimes. Perversely, the problems are sometimes with regulations that are designed to protect individual insured; on other occasions the motivation is more fiscal or bureaucratic in nature.

Guidance given included:

  • Careful scrutiny of the security and claims support offered in any jurisdictions where cover is offered, particularly where stand alone cover is written, for regulatory reasons, off paper issued by a friendly front, rather than a company within the same group as the global programme leader
  • Rigorous interrogation of DIC/DIL and other methods which purportedly circumvent the requirements of local regulations
  • The use of cross-indemnification from the parent company to ensure that a global aggregate limit is not breached, thus enabling premium cost to be contained
  • Giving broker clear instructions as to the group’s corporate structure to ensure that subsidiaries are brought within the cover in each jurisdiction where cover is required

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.



The original publication date for this article was 23/01/2008.