The directors & officers’ (D&Os’) insurance policy, which compensates key management personnel of a company against legal actions, is seeing a surge in demand. The cover, which was earlier being purchased by businesses with a global exposure, is now being bought by companies with only domestic stakeholders as well.
The trigger for the renewed demand for this cover has been the amendment to the Companies Act last year. Under this, the government can ask the National Company Law Tribunal to hold directors and key management personnel responsible without any limit to liability in the event of fraud.
Besides this, there have been several actions by enforcement authorities against directors in recent times, particularly in the financial sector. Insurers say that the regulator’s action against directors of a large private bank have triggered claims under the policy. The regulatory action against IL&FS is also believed to have triggered a claim by the erstwhile management.