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