The Directors & Officers (D&O) insurance market, also known as Management Liability, has experienced significant changes since Covid-19 started to affect our way of life almost a year ago. For the Media and Entertainment sector, this has created additional challenges as many in the sector have gone through the painful process of redundancies and trading losses due to significantly reduced activity.
Here we look at how these changes might affect your D&O insurance and where we can help:
A quick overview – what is D&O insurance?
D&O insurance provides financial protection to those who act in the capacity of a director or senior officer of a company and covers defence costs and/or damages that may arise from decisions taken on behalf of the company. Typical losses come from areas such as employee related disputes, health & safety breaches, wrongful trading and environmental pollution investigations.
How your D&O insurance might be affected
Covid-19 has impacted the media and entertainment sector particularly harshly and as a result there is a higher frequency of claims, most typically around legal action arising from bankruptcy/trading losses and employee disputes/actions involving redundancy. What does this mean for your D&O insurance?
- Market increases of 50%-100% as standard. Those who have ongoing claims must expect even higher premium uplifts.
- Employee related claims have represented a large portion of insurers losses so we are seeing increased excess levels for this section of cover (known as employment practice liability).
- Any companies who have managed redundancies during the pandemic will find moving insurer at renewal more challenging. Insurers new business appetite is now extremely cautious.
- New ventures are finding it more difficult to obtain terms for D&O insurance – insurers are wary of picking up trading related losses for companies without a financial history.
Managing the impact
With insurers imposing rate and excess increases, we recommend preparing the below detail for insurers in advance of your D&O insurance renewal:
- Provide insurers with full details of any redundancies – information should include details of the HR process, any non-standard settlement agreements, confirmation legal advice has been taken and commentary on any issues arising from the redundancies.
- Highlight and provide granular detail to insurers of any non-UK business activities. North America remains a challenging territory for most UK insurers so full details of US contracts will be required.
- Mergers and acquisitions activity. Provide insurers with details of any planned acquisitions at an early stage.
- Be prepared to supply management accounts or your latest reporting accounts as insurers are looking more closely at financial stability.
If you have any queries or would like to discuss Directors & Officers insurance, please contact Simon Miller on 01638 675993 or click here to send an email.