Aon  |  Financial Institutions Practice
Directors & Officers

The financial institutions industry is consistently targeted for securities class actions filings and derivative demand litigation against the company and its management. In order to protect their companies and attract and retain the best talent, these entities must have a robust Directors & Officers (D&O) Liability Insurance program in place.

The landscape for financial institutions continues to be challenging with several new and ongoing exposures, including:

  • Increased regulatory activity and compliance shortfalls
  • A failure to foresee or disclose COVID-19 related risks, risks related to working remotely and returning to offices
  • Event-driven litigation related to the #MeToo movement, cyber events, etc.
  • Elevated securities class actions and derivative demand litigation
  • Facilitating government stimulus programs
  • Accelerated adoption of new technologies and increased digitization
  • Environmental, Social and Governance (ESG) risks; emerging regulation, disclosure and compliance
  • Diversity and inclusion; board pay and diversity
  • Adoption of digital assets; related concerns with AML and KYC
  • Market volatility

The potential reputational damage caused by litigation against directors and officers can have immediate and long-term impacts on the business, potentially eroding long-term sustainability.

In a recent study, 77% of events which caused reputational damage were caused by failures in governance and poor business practices1.

Aside from focusing on building operational and people risk resilience to manage D&O risk, the insurance market can support financial institutions with the financial impact caused by D&O events.

D&O Insurance covers the cost of compensation claims made against the firm’s directors and key managers (officers) for actions taken within the scope of their regular duties.

Invaluable individual coverage - D&O Liability Insurance provides executives with personal liability and financial loss protection from wrongful acts committed—or allegedly committed—in their capacity as corporate officers.

Access to specialist broking teams with industry-specific expertise can help firms access competitive capacity and pricing for D&O insurance.

1 Pentland Analytics 2020