Corporate scandal, stricter corporate governance and the increase in the number of claims against directors and officers of UK companies mean that many companies view the purchase of directors’ and officers’ (D&O) insurance cover, as increasingly important. D&O cover is designed to protect directors and officers from any claims that arise in relation to the discharge of their duties. Companies are permitted to purchase and maintain D&O cover for their officers and auditors under Section 310 of the CompaniesAct 1985.
According to recent press reports, the cost of D&O cover has increased significantly over the past two years (up by a 50% average in 2003 and estimated to be rising by 20% this year). In the US, the increase of securities litigation and class action lawsuits mean that UK companies who raise money in the US, either through stock market or private placements, are particularly hard hit by soaring costs of cover.
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