New legislation changes signal relief for D&O liability premiums
The increasing cost of Directors & Officers or “D&O” liability insurance has been a live issue in the insurance market for some time now. Bellrock has continually observed companies being refused cover or experience an unsustainable increase to premiums. See our previous article on D&O liability premiums here.
But it seems, some much needed change may be afoot in this insurance class. On Tuesday, 10 August 2021, legislation permanently easing continuous disclosure laws passed through parliament, effectively reducing the scope of liability for corporations and directors regarding sharemarket disclosure obligations. Following the changes, companies will now be liable for breaches to continuous disclosure laws only under circumstances where their directors or officers acted “with knowledge, recklessness or negligence” in disclosure of market-sensitive information. Prior to the change, the burden of proof was on non-disclosure of information, regardless of intention, on a “strict liability” or “no fault” basis.
The government’s response has been aimed at providing certainty to company directors. It also reflects concerns over unsustainable increases in D&O liability insurance premiums of up to 250 percent. It is thought that the changes will serve to reduce the incidence of speculative shareholder class actions against companies. The losses from which being one of the key contributors to the skyrocketing premiums seen over the past few years.
What impact will this have on D&O Premiums?
The impact of this change may take some time to filter through, however the result should see fewer speculative class actions which should translate to an increased availability of cover from the insurance market and ultimately, reductions in premium.
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