Directors and Officers face significant challenges due to the ongoing impact of globalisation, technological advances and regulatory changes, particularly when the business has subsidiary companies in multiple jurisdictions.
Whilst a D&O Liability Insurance policy may state on it that it provides ‘worldwide territorial limits and worldwide claims jurisdiction`, this is always subject to the insurer being legally permitted to indemnify. Insurance laws and regulations differ from country to country and in some parts of the world it is illegal for a subsidiary company to be indemnified by an insurer that is not locally domiciled or regulated in the same country.
Some policyholders seek to circumnavigate this issue by relying on ‘financial interest clause` (whereby the insurer pays the local uninsured loss to the parent co instead). But what happens when the policyholder parent company seek to redistribute those claims monies down to the subsidiary entity in a foreign country?
Whilst this mechanism works in some countries of the world, in other countries the flow of money would be deemed taxable income, reducing the amount available to pay for the loss. Worse still, there are also countries where an asset freeze could happen and regulators stepping in to investigate &/or prohibit the claim. To further add to this complexity, the laws of some countries of the world do not allow payment of legal expenses to local directors, funded by non-admitted insurers.
The solution to this can be found through a combination of master policy, financial interest clause combined with local policies. To save premium, a hybrid approach may be suitable, whereby the local policies are only arranged in those countries which have the most onerous or prohibitive local laws and regulations.
Risk managers should select a specialist D&O insurance broker when seeking coverage. W Denis has a long history in arranging Management Liability Insurance for all types of organisations from start-ups, to global public companies. For a quotation please contact email@example.com or arrange an appointment via Daniel.firstname.lastname@example.org