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Wall Street reform law yet to effect D&O market

Posted On: Jul. 19, 2015 12:00 AM CST

The Dodd-Frank Wall Street Reform and Consumer Protection Act has had little effect on the directors and officers liability market so far, but future rulemaking could change that.

Many thought Dodd-Frank was going to result in more claims against financial institutions, but “somewhat surprisingly, it's been a relatively benign claims environment for financial institutions over the past few years” and has not affected the market “in the way we might have expected,” said Will Fahey, New York-based senior vice president with Zurich North America's management liability group.

Dodd-Frank has “had no effect on (D&O) rates whatsoever,” said Brian Wanat, New York-based CEO of the U.S. financial services group at Aon Risk Solutions. “There are limited questions these days about Dodd-Frank or (the Sarbanes Oxley Act), so there's no real, substantive, tangible effects on the D&O industry.”

“There's just more questions for the insurers to ask to make sure there's compliance on various issues,” said Dan A. Bailey, a member of law firm Bailey Cavalieri L.L.C. in Columbus, Ohio.

“In terms of claims and payments by insurers, I can't say that it has had a material impact on the industry,” Mr. Bailey said.

However, some observers say there could be changes due to rulemaking, including “clawback” rules the U.S. Securities and Exchange Commission proposed earlier this month that were called for by Dodd-Frank.

The proposed clawback rules would direct national securities exchanges and associations to establish listing standards mandating that companies adopt policies requiring executive officers to repay incentive-based compensation they were erroneously rewarded.

The SEC said in a statement that the proposal completes all executive compensation rules required by the law.