Directors and officers insurance quotes from licensed Australian brokers

How the cover is structured

Directors and officers policies are conventionally described in three parts, and knowing which part does what makes the wording much easier to read. Side A is the one that matters most to an individual director.

• Side A: pays the director directly where the company cannot or will not indemnify them
• Side B: reimburses the company where it has indemnified its directors
• Side C: covers the company itself for securities claims, mainly relevant to listed entities
• Defence costs, usually advanced as they are incurred rather than after the outcome
• Investigation costs for regulatory inquiries and examinations
• Cover for past, present and future directors and officers

Where claims actually come from

Regulators are the most visible source, with ASIC and the ACCC active across a range of conduct, but they are not the only one. Claims also arrive from shareholders, creditors, liquidators pursuing insolvent trading, employees, competitors and customers. Insolvency is a particularly sharp scenario, because that is exactly when the company can no longer indemnify its directors and Side A cover becomes the only thing standing. That is why directors of financially stressed companies pay close attention to this policy.

Not for profit and community boards

Volunteer directors of clubs, associations and charities carry many of the same duties as commercial directors, often with less support and no remuneration. Association incorporation legislation and the governance standards for registered charities both create obligations that can be tested. Cover for not for profit boards is generally inexpensive relative to commercial policies, and for many organisations it is what allows them to recruit competent people to the board at all.

What underwriters look at

Financial position leads. Underwriters will want financial statements, and a balance sheet under strain will affect terms because insolvency drives claims. After that comes the industry, the ownership structure, whether there are external investors or a plan to raise capital, any history of regulatory contact and the experience of the board. Private companies with a small owner managed board are often better served by a management liability policy, which includes this cover alongside employment practices and statutory liability.