Seek compliant D&O insurance solutions reflecting your businesses international exposures

Insight

Published

25 January 2023

Participants in the international Directors’ & Officers’ Liability (D&O) market are becoming increasingly concerned over the number of non US headquartered insureds utilizing a subsidiary, or US postal address in order to maximize potential savings.

This may involve a firm headquartered internationally, such as in the UK or Europe, using the address of a US subsidiary when purchasing its D&O insurances to access the US insurance market.

On the surface this arrangement appears as an attractive option since it may allow clients to obtain even more competitive options than maybe obtainable internationally. Many firms who are US traded acquiring D&O insurance in this way expect their main litigation exposure to result from securities actions in the US, leaving them optimistic about any issues arising from an international claim. However at what cost?

There is real potential for taxation consequences, coverage deficiencies in covering both the legal HQ and subsidiaries, not following the international nuances of local cover/law, regulatory scrutiny and complex claims payment issues.

What is especially concerning is if a Side A / non-indemnifiable claim arose. Not only could these arrangements lead to serious tax and licensing hurdles, insurers might not be able to advance payment to a director at all. Delays to or the inability to indemnify a side A claim directly into an international territory could leave directors exposed at significant personal cost and without representation at the moment a D&O policy is most needed.

The three major concerns are related to the payment of appropriate insurance premium taxes, regulatory action and the ability for an insurers to compliantly pay a claim and indemnify into an overseas territory.

It’s likely that management liability exposures in Europe and internationally will heighten amid inflation, geopolitical instability, surging energy prices and an increased focus on ESG. We also believe that international regulatory action and scrutiny will intensify as a result of the same factors.

In recent months, the D&O insurance market has softened more quickly than many other lines of business – largely prompted by increased competition and reduction in new business inflow with the slowdown in the capital markets, leading to insurers chasing business disregarding potential coverage, taxation, compliance or regulatory implications.

International D&O insurance expertise

At Howden, our specialist international financial lines team prevent and mitigate these risks from occurring. With experts operating in 90+ countries outside of North America, we understand the in-country and international coverage nuances.

To help you with your purchase, we can provide global taxation advices and generate a ‘heat map’ style report to identify the countries where an insured has exposure, comment on admitted vs non admitted insurance, in-country indemnification rules, country fraud indices, detailed specific county law and any recent country specific litigation.

To talk further about international D&O placements please contact Piers Davis.