In our dealings with businesses in Asia, we find that many individuals and companies may be vulnerable to a number of new risks that they may not have been previously exposed to. In this new series of articles, we look at the different types of business insurance to help you work out what coverage your company needs. We start by shining a spotlight on Directors and Officers Insurance.
Is your business exposed?
Insurance often seems like an unnecessary cost until you need to make a claim. Only then do the dire consequences of failing to procure the right insurance coverage become evident – when it’s too late to mitigate the significant financial risks.
This is as true for businesses as it is for individuals. Thousands of businesses across Asia could be leaving themselves vulnerable to unforeseen risks and financial losses because they are underestimating their insurance needs.
Recognising and rectifying the gaps in insurance coverage will bolster your company’s financial resilience in the face of unexpected events and shield your business and employees from potential liabilities or unforeseen risks that could otherwise jeopardise your operations and long-term success.
In this new series of articles, we explain the different types of insurance that can protect your business and give you the information you need to ensure that you are covered for the unexpected.
What is Directors and Officers insurance?
Directors and Officers insurance, commonly known as D&O insurance, protects the senior executives of a company or organisation against liability claims. It safeguards them in the event of lawsuits arising from alleged wrongful acts resulting from decisions made in the course of carrying out their duties.
These wrongful acts include breach of fiduciary duty, where directors or officers are accused of actions contrary to the company’s or shareholders’ best interests, mismanagement, negligence, poor decision-making or errors in judgement leading to financial losses, misrepresentation in financial statements, accusations of insider trading and employment-related issues such as discrimination, harassment or unlawful termination.
D&O insurance shields the personal assets of a company’s directors and officers and extends financial support for legal expenses, settlements, or judgments resulting from any legal actions against them.
Which industries benefit from Directors and Officers Insurance?
The short answer is all of them! Any company in an industry where directors, officers, or executives make critical decisions that could lead to potential lawsuits or liabilities should seriously consider having D&O insurance as part of their risk management strategy.
Directors and Officers Insurance: a hypothetical case study
Get Better Healthcare is a leading provider of medical services and products, serving a wide range of patients. The company’s board of directors and executive officers decide to acquire a new medical technology company which unfortunately leads to significant financial losses.
A group of shareholders files a lawsuit against Get Better Healthcare’s board of directors alleging mismanagement and failure to conduct adequate due diligence before the acquisition.
D&O insurance would cover the legal costs associated with defending the board of directors and officers named in the lawsuit related to the acquisition. This coverage includes legal fees, court expenses, and settlements, reducing the financial burden on the company’s resources.
It also protects the personal assets of the individual directors and officers involved, shielding their wealth from being directly impacted by legal judgments arising from the lawsuit.
Ultimately, D&O insurance safeguards the company’s leadership, ensuring they can continue making critical decisions without the fear of personal financial repercussions due to legal actions.
If you are interested in discussing D&O insurance for your business, Infinity has 20 years of experience helping to protect businesses in Asia against financial risk. We pride ourselves on our independent, in-depth knowledge to help you make better policy choices and to provide expert help if you need to make a claim.
Get in touch for an in-depth analysis of the insurance requirements of your business.
I have worked in the international insurance industry across three continents over the past 28 years. I am the Finance Director for Infinity Financial Solutions and also carry responsibility for the group’s compliance and regulation.