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NU Online News Service, Nov. 9, 2:49 p.m. EST
Sales of directors and officers liability insurance are growing rapidly in Europe as shareholder suits increase, a consulting firm is reporting.
Advisen Ltd. said accounting scandals and corporate governance shortfalls have led to new laws across Europe requiring greater transparency and heightened shareholder protections.
In addition, the firm’s study found that legal systems have been reformed to give shareholders unprecedented access to the courts.
As a result of these governance and legal reforms, Advisen said directors are exposed to greater liability, and legal actions naming companies and their directors have increased throughout Europe.
The firm said that “some recent suits have settled for hundreds of millions of Euros.”
John Molka III, the author of the report, said in a statement: “The United States is still the world’s preferred venue for litigating shareholder lawsuits, but more and more suits are being brought in European courts. Increasingly, directors of European companies are demanding insurance protection. The U.S. D&O market has shrunk during the recession, but premium volume is up sharply in Europe.”
Advisen said securities regulators across Europe have stepped up enforcement activities in recent years, further exposing corporate directors to liability.
The firm noted that regulators across the globe are sharing information and coordinating investigations, putting additional pressure on multinational corporations.
Investigations and other enforcement activities not only are costly for companies, they also can spark shareholder suits, Advisen said.
“Underwriters clearly are concerned about the heightened exposure to claims, but at the same time the threat of regulatory investigations and shareholder suits is creating unprecedented demand for D&O insurance,” said Dave Bradford, Advisen executive vice president.
According to Mr. Bradford, “Most of the largest European companies now buy coverage, and a growing number of midsize firms are recognizing that they too are potential litigation targets. We expect to see double-digit growth in D&O premium volumes in the coming years, driven by both rate increases and new companies seeking to purchase D&O insurance.”
The Advisen report contains information on a country-by-country basis for marketing, sales, product development and strategic planning purposes.
According to the company, it should be “essential reading for risk managers of any company with European operations to understand the emerging liability picture and how the rapidly escalating risks faced by their firms’ directors and officers vary by country.”
The 20-page analysis, “European D&O Insurance Market to Benefit from Governance and Legal Reforms,” costs $499 and can be purchased online at The Advisen Corner, http://corner.advisen.com/reports_topical_european_do.html.