Frequently Asked Questions: Directors & Officers (D&O) Liability Insurance
Directors & Officers (D&O) liability insurance protects directors, officers, board members, and senior managers against personal liability for claims made against them while managing an organization. If you are considering D&O insurance for the first time, you likely have questions. Here are some of the most common ones we hear.
What is D&O insurance and why do we need it?
D&O insurance protects the personal assets of directors and officers if they are sued by employees, investors, regulators, or other third parties for actions taken while managing the organization. These claims can come from:
- Vendors or contractors
- Employees
- Regulators
- Customers
- Investors or shareholders
Common claims include mismanagement, breach of duty, or regulatory investigations. Without D&O cover, defense costs (and potential settlements) would have to be paid personally.
>> READ MORE Why Every International Business Needs Directors & Officers (D&O) Liability Insurance
Who does a D&O policy cover?
A typical policy covers:
- Past, present, and future directors and officers
- Certain senior managers
- In some cases, the company itself (if included as an insured entity)
It does not usually cover criminal fines or intentional fraudulent acts.
Does the governing law of the policy matter?
Yes. For example, many global D&O policies are underwritten by Lloyd’s of London, where English law governs the policy.
This is common and widely accepted, even for companies headquartered outside the UK. Local law (such as in Hong Kong or Singapore) can sometimes be negotiated, but it depends on the market appetite.
What information do insurers require for a quote?
To get a competitive D&O quote, insurers typically need:
- Company structure: Details of subsidiaries, regions of operation, and ownership
- Board composition: A list of directors and key executives (bios are often requested)
- Financial information: Latest audited financial statements (balance sheet, P&L)
- Risk profile: Whether the company operates in high-risk sectors or jurisdictions
- Claims history: Any past or current investigations, litigation, or regulatory actions
If sensitive financials are involved, a broker can arrange a mutual Non-Disclosure Agreement (NDA).
How much coverage (limit of liability) should we buy?
This depends on:
- Size and complexity of the organization
- Regulatory environment
- The personal risk tolerance of the directors
- Market benchmarks (your broker can help with this)
Typical limits for SMEs range from US$1 million to US$10 million.
Does D&O cover regulatory investigations?
Yes, provided they are directed at the individuals. Many modern D&O policies now include coverage for:
- Regulatory inquiries
- Extradition proceedings
- Costs of legal representation at hearings or investigations
How is D&O different from Professional Indemnity (PI) or Errors & Omissions (E&O) insurance?
D&O protects directors and senior decision-makers personally. PI/E&O protects the company against claims related to the services or advice it provides. These are complementary, not interchangeable.
How do we ensure the policy remains fit for purpose?
As your organization evolves, so do your exposures. It’s important to:
- Review the policy wording annually
- Update the insurer with changes in your business
- Benchmark pricing and coverage regularly
We also recommend a thorough policy review every 2-3 years.
Can we choose which directors or officers are covered?
D&O policies cover all insured persons (past, present, and future directors/officers) as a class. You can’t pick and choose individual names to include or exclude. However, if there is a specific individual whose risk profile the company does not want to cover, this can sometimes be negotiated with the insurer as an exclusion (rare and not generally recommended). Coverage is for the role, not the individual.
Can a partner or shareholder be a beneficiary of the policy?
No. D&O insurance is not a beneficiary-style policy. It does not pay out to individuals as a benefit. Instead, it reimburses defense costs, settlements, and judgments arising from covered claims made against directors/officers. The company itself may also be reimbursed if it has indemnified the director.
How can One World Cover help?
We specialize in helping international organizations and globally minded companies secure D&O coverage that matches their risk profile. We can:
- Advise on the right limit and structure
- Negotiate global Lloyd’s-backed policies
- Benchmark your coverage against peers
- Provide guidance on board governance and claims processes
Thinking about your first D&O policy?
One World Cover works with Lloyd’s and other global markets to provide access to best-in-class coverage for companies with international operations. Contact us to start a conversation about protecting your leadership team.
READ MORE >> D&O (Directors & Officers) Insurance: Why the Prior & Pending Litigation Date Matters
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