New and emerging risks
Against the backdrop of this risk landscape, many directors are recognising the benefits of taking out Directors & Officers (D&O insurance).
First introduced by the London Insurance market in the 1930s, D&O initially went by the name of 'personal finance protection insurance', and clarified rules around the indemnification of directors and officers from claims. Since 2000 there has been a 63% increase in the number of UK businesses, reaching 5.7 million private sector businesses in 2018 of these, 99% are small or medium enterprises (SMEs). By this reckoning, there are at least the same numbers of company directors, since each private company must have at least one director. It’s almost impossible to say how many UK companies and directors buy D&O insurance, since only the small number of publicly traded companies must declare whether or not this insurance is held. However, reports suggest that penetration of D&O insurance is much lower amongst SMEs with only approximately 27% taking up cover. It could be argued that SMEs are even more vulnerable than their larger counterparts, since many are unlikely to have dedicated HR or legal departments to offer advice should an incident occur.
A director could even be held liable once they’ve ceased to hold office, meaning that any D&O policy should ideally include run-off cover. Crucially, this must have been in place at the time of the alleged incident to ensure the policy is on cover.