Litigation fears push D&O limits higher: AIRMIC survey

LONDON—Rising fears of shareholder litigation have prompted members of the Assn. of Insurance and Risk Managers to purchase large directors and officers liability coverage limits, a survey concludes.

The survey of members of the London-based risk management association conducted by Advisen Ltd. showed about 25% of the 277 AIRMIC members responding to the survey are protecting themselves from the threat of suits by shareholders or other stakeholders by purchasing D&O limits of £100 million ($164.9 million) or more.

The online survey conducted in November found chemical, natural resources and pharmaceutical companies paid the highest estimated average annual D&O premium at £13.2 million ($21.8 million), although one company that paid a very large premium influenced the outcome.

Companies in the financial services sector spent an average of £12.4 million ($20.5 million) a year on D&O insurance, according to the survey.

“What once was perceived as a U.S. problem—class action lawsuits by disgruntled shareholders—has spread rapidly through the world” as countries including the United Kingdom move toward a U.S.-style litigation system, the survey noted.

While D&O claims are rising, capacity for the coverage is abundant with limits up to £300 million ($494.9 million) per program available, according to the survey.

The “2009 AIRMIC D&O Benchmarking Survey,” which costs $150, is available at corner.advisen.com/reports_airmic_DO_June09.html.