Regulatory Investigations Top Directors’ List of Concerns: Willis/Overy Survey

The liability risks facing company directors and officers are intensifying in the wake of the economic crisis. At the head of the list are “regulatory investigations and enquiries,” which pose the greatest perceived threat to companies and their directors.

The findings are detailed in a report jointly released by international legal firm Allen & Overy and Willis Group Holdings, the global insurance broker.

Willis’ bulletin explained that the “2011 Directors’ Liability Survey” sought responses from more than 100 individuals, “comprising directors, in-house lawyers, risk and compliance professionals, the majority of which are UK-based public and private companies, about their experience of claims, their current levels of protection and their concerns around risk going forward.”

The study determined that the “combination of heightened public and shareholder scrutiny, and a proliferation of powers amongst, and growing interaction between, regulators globally means the spotlight is on directors and officers like never before.”

Other key findings of the survey include the following:
• Criminal and regulatory fines and penalties were the second biggest worry, identified by 64 per cent of respondents as a significant risk to their business.
• Some 20 per cent of respondents had already experienced a claim or investigation involving a director of their company. This is perhaps surprising given the usual perception of the UK’s relatively benign litigation environment.
• A third of those affected made a claim under their D&O insurance policy, and 35 per cent sought indemnity from their company, suggesting almost equal take-up of insurance and indemnity protection.

In addition a majority of those queried in the survey indicated that their “biggest concern was potential exclusions in their existing D&O policy that could leave directors exposed should they come under investigation.”

Francis Kean, Executive Director of FINEX, the financial and executive risk division of Willis, commented: “We wanted an accurate snapshot of the extent to which the actual or perceived liability risks faced by directors of large companies and whether those directors believe they are adequately protected by insurance and indemnification solutions. The survey contains some compelling findings from this perspective.”

Andrew Barton, Counsel at Allen & Overy, observed: “The financial crisis has thrown director risk and liability into the spotlight. It’s clear that the increasingly tangled web of international regulation stemming from the financial crisis is causing directors and senior executives real concern and directors need to be clear about how far their cover extends.”

Source: Willis Group Holdings

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