IUA Circular 026/24
Directors and Officers Insurance guide: global coverage and non-admitted business
Date: 19 March 2024
Interest Groups: IUA member contacts, all professional lines interests, Compliance Committee
Subject: Publication of a guide for companies utilising subsidiaries as the main policyholder on a non-admitted basis, when seeking global directors and officers cover
IUA Contact: Chris Jones, Director of Legal, Underwriting and Claims
Downloads accompanying the is circular:
The IUA has published a guide for companies that are considering utilising subsidiaries as the main policyholder on a non-admitted basis, when seeking global directors and officers (D&O) liability cover.
The guide provides information on various compliance, tax and coverage issues that should be considered by such firms. It is available via the above download link and from the Directors and Officers Underwriting Group page of the IUA website.
Rules determining whether an insurer can underwrite D&O cover in a country where it is not licenced vary from jurisdiction to jurisdiction and in some cases is strictly prohibited. Financial Interest Clauses are sometimes employed as a solution, but their use can be limited, particularly in the D&O context.
Tax issues highlighted in the document include the potential liability for premium taxes to be paid in each country where there is a covered subsidiary for multinational policies.
Also listed are a number of potential coverage limitations. Since, for example, cover for the directors and officers of subsidiaries under a D&O policy is typically linked on the listing of the parent company as the policyholder, the naming of a subsidiary of a parent company as a policyholder could result in there being no cover for the directors and officers of the parent company and/or some or all of a parent company’s subsidiaries. Whilst D&O policy wordings can be amended to address this, there could be an increased risk of unintended gaps in cover for directors and officers of the parent company and the parent company’s subsidiaries.
The D&O guide has been produced with significant input from members of the IUA’s Directors and Officers Underwriting Group and using external legal counsel, Andrew Milne at CMS Cameron McKenna Nabarro Olswang LLP.
The content of the guide does not constitute legal advice, and readers are advised to consult their lawyers should they require advice on any matter that it raises.