Insights

Claims brought against financial services company managers are on the rise. Directors and officers may find themselves having to fight claims with their own assets and time. In worst case scenarios, individual financial services managers are being held accountable for administrative errors under their watch, potentially involving financially ruinous consequences and lasting career damage. That is why directors’ and officers’ insurance cover (or D&O cover) has never been more important.

Directors’ & officers’ is applicable to all firms with two or more directors and is usually taken up by firms in the financial services space. Given the FCA SM&CR (senior managers and certification regime) which affects firms in the investments, insurance and consumer credit space, this cover is more important than ever. Directors have personal accountability to the FCA and could face fines or other regulatory sanctions if they do not maintain the ongoing required standards. 

How do you protect yourself against a financial services D&O claim?

If you are a director or officer of a financial services company, you may face personal consequences if you are found to have been individually in breach of duty in a professional capacity. Business insurance will not ordinarily cover individuals who are legally pursued as a result of the failings of a company, so it’s important to gauge what your personal liability might be and how you can protect yourself from a range of repercussions. Directors’ and officers’ insurance aims to cover the financial risks of such a claim.

What is directors’ and officers’ cover?

Directors’ and officers’ cover (or D&O cover) is specifically designed to protect individuals who may be held accountable in the case of a breach of duty, neglect, breach of contract, breach of employment legislation or breach of health and safety legislation. D&O insurance cover protects individuals against harm in the case of a claim against financial services directors or officers. Unlike some other forms of business insurance, D&O cover is not required at a regulatory level and can sometimes be overlooked as a luxury.

Are claims against directors and officers becoming more common?

In recent years, increasing scrutiny of corporate behaviour twinned with a claim-friendly legal environment have seen an acceleration in claims against financial services directors and officers. In some cases, this will be because the company assets have been exhausted, in others because the legal route via individuals is more likely to succeed.

Who should consider D&O insurance cover?  

Job title is less important than level of responsibility when it comes to D&O claim exposure. Unlike claims made against companies, claims made against directors, officers and other key management personnel seek redress through individuals. You may be a partner, director, general manager, officer or something else. But if you make decisions about investment or other key processes on behalf of your financial services company you may become the subject of a D&O claim, and directors’ and officers’ insurance cover could be beneficial in the event of an allegation of wrongdoing. 

Who would bring a D&O claim against a financial services provider?

Legal actions can be brought by many different parties including investors, shareholders, staff members, disgruntled customers or even liquidators. These claims may well be frivolous or malicious in their nature but will still require defending, which can involve significant quantities of time and money. Directors’ and officers’ insurance covers you against these costs.

To discuss directors’ and officers’ insurance for financial services, talk to our specialist team on 0203 859 0064, email info@absolutecover.co.uk or visit absolutecover.co.uk for more information.