The expanding online universe has introduced new financial risks that may not be covered under general and professional liability insurance, including standard directors’ and officers’ (D&O) policies, warns Willis.

In its latest Executive Risks Boardroom Guide, the broker advises corporate directors and risk managers to ensure that they buy appropriately tailored policies that provide protection against the rapidly expanding risks to which they are vulnerable, both personally and professionally.

Throughout 2011, companies of all sizes struggled with cyber incidents, ranging from malicious intrusions to employee negligence. Indeed, big corporations are not the only ones that are vulnerable to hackers. Half of all US companies that have experienced data breaches have fewer than 1,000 employees, according to the report.

Last October, in response to the increasing dependence on digital technologies and associated risks, the US Securities and Exchange Commission (SEC) issued disclosure guidance, which recommended that public companies disclose, among other things, cyber incidents.

“The risks and dilemmas posed by serious data breaches apply to board directors of all businesses,” said Mark Wakefield, executive director of FINEX Global, Willis’ Financial, Executive Risk and Professional Liability business. “Courts generally are likely to take the view that directors have a duty to gain a sufficient understanding of the nature of the risks facing their businesses, including cyber risks. Ignorance is still no defence.”

“Against this backdrop the D&O policy has had to move with the times, as buyers and brokers seek cover for new and previously untested areas of liability,” he continued. “Willis has responded with the introduction of DARCstar in 2011, which provides ‘all risks cover’ that responds better to today’s quick-moving environment,” says Wakefield.

Overall, Willis said that the global D&O insurance market has grown in capacity, while a number of new insurers have entered the market for international excess. The effect of this has been to keep pricing of D&O relatively stable in most areas, despite the economic turmoil and the heightened threat of litigation.

“Overall the market has so far weathered the economic storm if not intact, then without any major disruption,” explains Wakefield.

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