Executive insurance liability coverages (employment practices, directors & officers, etc.) are seeing their risk level increase, but many companies do not appear to be adequately preparing for this, according to a recent survey by Chubb of 145 public companies. Factors in the increase include a significantly increased willingness of regulatory agencies to litigate for allegations of employment discrimination, wage and hour violations, bribery of foreign officials, and, for financial institutions, negligence and breach of fiduciary duty. According to Chubb, there is also a 90% chance after a merger or acquisition that shareholders will sue the acquired company.
An increasingly popular alternative over third-party insurers is for companies to form a captive insurance company. This gives companies more control over the financial aspects, allows more customization of coverages, and provides tax benefits. Captives can cover many property and liability exposures, including executive liability, and can provide either ground-up coverage or can complement coverage obtained through the commercial market by providing deductible reimbursement, excess coverage, or coverage for various exclusions.
How about you? Are you and/or your firm’s executives adequately covered? Have you evaluated your executive liability coverage recently? Have you formed a captive insurance company or other alternative risk transfer mechanism? Let us know.