These trends affect both public and private companies:
• Regulatory enforcement. The Department of Labor, Federal Trade Commission and other agencies have stepped up enforcement in recent years, which have resulted in claims of mismanagement against directors and officers who fail to prepare for this increased enforcement. However, a new report by Marsh has predicted that the impact of these and other regulations including under Sarbanes-Oakley and Dodd-Frank may be diminished as a result of actions taken by the Trump administration.
• Emerging risks. These include cyber liability, environmental liability, breach of privacy, reputation risks and more. Failure to take action to protect the company against these risks could result in claims of negligence against directors and officers. As more specific insurance for some of these risks, such as cyber and environmental liability, have been developed, some pressure on D&O policies and premiums have been reduced.
• Changing policies. Insurers have been adding exclusionary language to insurance policies the past few years, limiting coverage and leaving officers and directors personally responsible for claims not covered by those policies. The Marsh report has speculated, however, that reduced D&O claims and a better outlook for D&O insurance may result in companies offering to “sell back” some exclusionary terms and even offer reduced premiums.
Source: Marsh’s full report is “The U.S. Financial and Professional Market in 2017: Our Top 10 List.”