Chartis has warned directors and officers that they need to adapt to a “new normal”. This new environment is one of elevated claims combined with greater regulatory scrutiny.

The number of D&O claims has increased in frequency and severity following the global financial crisis, which is in itself unsurprising, but for the time being, the numbers seem to have plateaued. Claims continue to maintain a steady pace, with no sign of returning to pre-downturn volumes suggesting that what the market is experiencing now ought to be considered the “new normal”. Authorities are continuing to sharpen their focus on the activities of directors and officers and this is likely to continue with the introduction of new legislation, such as the Bribery Act in the UK.

Chartis’ head of commercial lines claims, Noona Barlow said, “Directors may need to get accustomed to a new environment – one of elevated claims combined with greater regulatory scrutiny, and do more to understand their obligations in order to ensure compliance.”

According to Barlow, directors and officers need to do everything they can to make sure they are educated about the changing regulatory environment, as well to understand the scope of coverage available to protect them.

She encourages directors to take on more responsibility for what takes place within their organisations, and urges directors to move away from looking at compliance as a box-ticking exercise and, in the context of the Bribery Act in particular, work towards establishing an ingrained and documented anti-bribery culture within their companies that is enforced from the very top downwards.

Directors and officers also need to better understand the coverage they are buying. Insurers need to work more closely with directors to help them understand what their obligations are, and ensure they have robust reporting protocols in place. Having a focused discussion on claims services before the need arises helps directors understand the coverage they have, as well as how to better avoid needing to use it. Barlow encouraged insureds and brokers to begin the dialogue with their claims team before the need arises.

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