Experts discuss the practical application and evolution of D&O insurance

Pérez-Llorca held the event, entitled “The practical application and evolution of D&O insurance,” at its head office in Madrid, and various experts in the Spanish insurance sector gathered to discuss current issues in the field of D&O insurance.

The session was opened by John Arsuaga, President and Managing Director of Lloyd’s Iberia, who also acted as moderator. Speakers included María Victoria Valentín-Gamazo, Deputy Manager of Financial Lines at AIG; Maria Belén Pose, Director of the Legal Department at Arag, and Laura Ruiz, a senior associate in Pérez-Llorca’s Litigation and Arbitration practice.

Laura Ruiz, who was the first to speak, conducted an analysis of the new D&O insurance from a legal perspective. She noted that there is growing concern regarding D&O insurance. She emphasised that it is essential for the policyholder to really understand the purpose of the D&O insurance, as well as who is covered by the policy. She also mentioned the role of D&O insurance in relation to covering administrators in the context of culpable insolvency, as well as the role of the insurer in the classification thereof.

María Victoria Valentín-Gamazo went on to discuss D&O insurance from the perspective of the insurance companies. She spoke of the significant increase in claims on D&O insurance policies, especially since 2016, the year which she considered to be “the turning point, given the amount of corruption cases that were reported.”

She also highlighted that claims are being made by companies of all sizes, “whereas before larger clients were affected.” She also explained the regulatory changes that have led to claims being increasingly “sophisticated”, and listed the main reasons for claiming. The list also included corporate liability actions, accounting responsibility and offences against the Public Treasury, among others.

This situation, she explained, is causing insurers to establish limits on the policies and increase premiums. However, the AIG manager considered that “D&O policies have always worked well” and that they remain “a good way to transfer the risk.”

María Belén Pose, who was next to speak, indicated that the risk of directors being held liable has increased recently, as correct compliance is becoming increasingly complicated due to the growing number and complexity of the obligations imposed on these directors.

In this regard, she reviewed recent Supreme Court case law concerning the most controversial issues relating to D&O insurance. Lastly, she mentioned the importance of ‘claims made’ clauses which limit claims, and the need to pay special attention when changing insurer to avoid gaps in cover as a result of these clauses.

The session ended with a round of questions from the audience, which was particularly interested in the most controversial issues relating to D&O insurance, such as the behaviour that is insurable, cover limits, and the differing interpretations of the Civil and Criminal Chambers of the Supreme Court in relation to the cover that must be provided by the insurer to the victim of a claim.