Directors and officers insurance (D&O)

Directors and officers insurance covers the personal liability of a company's directors and officers for decisions made while managing it.

The policy is bought by the company, which pays the premium, but it protects the individuals who run it: board members, executives and sometimes senior employees. Cover usually has up to three parts. One pays the defence costs and settlements of individuals when the company cannot or may not indemnify them. Another reimburses the company when it does. A third responds to claims made against the company itself.

It exists because managers can be sued personally for alleged mismanagement, breach of duty, misleading investors or regulatory failures, and legal defence alone can be ruinous. Common misunderstandings are that it covers any loss the company suffers, or deliberate fraud. Conduct exclusions, prior-acts limits and claims-made wording decide what responds, so the exact policy terms matter more than the label.

In insurance technology, the work centres on underwriting and distribution. Software pulls financial, ownership and litigation data to price risk for private and smaller companies, and digital brokers and agencies place cover with less paperwork. Newer questions concern how emerging exposures, such as automated decision-making, may create claims against management.

Written by Insurtech Daily.