Make Sure You're Covered - Dan Holloway, ACE Europe

Directors and officers would be forgiven for feeling that their jobs are becoming more dangerous, as regulations are tightened and litigation becomes more common. ACE Europe’s Dan Holloway tells Nigel Ash why his company’s D&O cover is the best on the market.

New regulations and legislation coupled with increasing litigation are making the world a far more dangerous place for company directors and officers. While large listed companies are well equipped to understand the risks, UK SMEs are only now starting to appreciate how exposed they have become – only a third has directors and officers’ (D&O) cover.

Dan Holloway, D&O product manager for ACE Europe, says: ‘The two main assumptions among SMEs seem to be that major claims are never going to be made against them and that buying insurance protection is going to be prohibitatively expensive. Both are wrong.

‘The Companies Act 2006 for the first time codifies the duties and obligations of company directors. They are now accountable not just for the long-term success of the business, but also for the interests of employees, relations with suppliers and customers, fairness toward shareholders and environmental impacts.’

COVERING ALL BASES

Following changes to the Companies Act in April 2005, companies can provide more protection for their directors and officers, through indemnification - providing the director's liability does not relate to paying a criminal fine, paying a regulatory fine, defending himself against a criminal proceeding in which he is convicted, defending himself from liability under the Companies Act 1985. An insolvent company would also be unable to indemnify.

According to Holloway: ‘A good D&O policy protects individuals from financial loss in such circumstances. Following an internal analysis of current policies in the UK, we believe our Elite product offers the widest cover currently available in the market.

‘One of the many strong points of our product is that while we never intend to cover fraud, we will defend an individual accused of fraud up to the moment that they are found guilty. This protects personal assets while a person mounts their defence. It also includes contesting extradition proceedings.

‘Additionally, if a court freezes an insured’s assets, our D&O policy has a deprivation of assets extension up to £300,000 to cover items such as school fees, housing and utility costs on their principal residence and any personal insurance that they have in place.’

Another strength, he adds, is that Elite provides cover against pollution claims, which are growing in size and may be large enough to drive an SME into insolvency, leaving the liability with the directors.

In addition, in circumstances where the cover has been used up within an insured period, ACE Elite will extend the same cover specifically to executive and non-executive directors to cover any loss not indemnifiable by the company.

UNIQUE PRODUCT

Holloway also points out: ‘Our policy is also unique in the market in that we protect directors from unpaid tax claims up to £1 million if their company goes insolvent.’

ACE Elite’s D&O cover extends from £1 million up to £15 million and can be bought ‘for premiums of just hundreds of pounds rather than the thousands that SME directors might assume,’ says Holloway. He adds: ‘D&O cover bought by a company for its directors and officers can be accessed individually or by the company. It is, however, not there for balance sheet protection, as some providers suggest.

‘The market is highly competitive on price, but we believe that what sets us apart is that we have not forgotten that D&O cover is about protecting individuals, rather than the company they work for, in an increasingly uncertain corporate environment.’

For directors and officers suffering sleepless nights concerned about the many ways they could be subject to criminal proceedings, a robust insurance policy should reassure them that in the worst-case scenario, they have the best protection available.