Aon and Chubb, the global insurer, are advising Isle of Man directors that they may need to go beyond simply complying with new Financial Services Commission (FSC) regulations on insurance to prevent gaps in cover. The companies were speaking at an Institute of Directors seminar in Douglas.
From 1 January 2010, with exemptions for some industries, individuals with more than 10 directorships will be regulated and must take out either professional indemnity or directors & officers insurance. The cover can be provided via their company. However, Aon believes the best approach is to undertake a risk assessment to consider whether both types of insurance are needed. This would address the different claims scenarios of third party liabilities to clients, as well as liabilities to the firm as a director versus the other directors.
It is good practice for directors to:
- Check that their company buys cover.
- Consider the breadth of cover provided. Although individuals can purchase D&O policies in their own name, the cover provided is often limited in scope whereas cover provided in the name of the company tends to be broader.
- Purchase limits that are adequate for their exposures rather than just complying with the minimum under the regulations (for example, directors with US exposure may require larger limits).
Gwyneth McShane, associate director of Aon, commented: “The changes in regulation are acting as a catalyst for directors in the Isle of Man to review the adequacy of their insurance cover. Without sufficient cover, directors run the risk of being non-compliant and could be held personally liable for defense costs that could run into hundreds of thousands of pounds.”
Antony Statham, development underwriter for Chubb Specialty Insurance, added: “Directors are facing an increasingly risky world with new legislation, more litigation and broader geographical jurisdictions. Furthermore, even directors who have left or retired from a company can still be held liable so it’s crucial to also check cover is still available during this period.”
The event, which comprised two sessions due to demand, was hosted by Aon Isle of Man’s executive director Andy Winwood.