Directors and Officers (D&O) Insurance

Whether you are a board member, senior executive, or an organization’s owner, you and your key leaders face risks from decisions made in the course of governance and operation. Directors and Officers Insurance (often called D&O insurance) exists to protect individuals and the entity from claims arising from alleged wrongful acts in management.

🟩 Quick Definition 

D&O insurance is a type of liability insurance that covers directors, officers and the organization itself for legal defence costs, damages or settlements stemming from claims of mismanagement, breach of duty, regulatory action or shareholder lawsuits.

Why D&O Insurance Matters

• Directors and officers can face personal liability when actions or decisions are challenged—whether by regulators, shareholders, employees or other parties.

• A single claim can involve extensive legal costs, reputational damage, and significant awards or settlements.

• Without D&O cover, leaders may be less willing to serve and companies may struggle to attract or retain qualified board members.

• Many organisations now recognise D&O as a core part of their governance and risk-management strategy.

What It Covers – The Key Components

D&O insurance typically protects against:

• Legal defence costs when a director or officer is sued for alleged wrongful acts.

• Settlements or judgments awarded against insured persons (or the company) if covered by the policy.

• Reimbursement of the company when it has indemnified directors/officers.

• Coverage for both current, past and sometimes future directors and officers (depending on policy terms).

• Sometimes investigations, regulatory actions, shareholder derivative claims, employment matters, or reputational risk exposures (depending on endorsements).

It is important to note what D&O generally does not cover:

• Fraudulent or criminal acts by insured persons, once proven.

• Personal profit or illegal remuneration.

• Claims arising from known events before policy inception (“prior acts”).

• Fines and penalties that are uninsurable by law.

The “Sides” of D&O Coverage

D&O policies often include distinct coverage sides that serve different purposes:

• Side A: Protects individual directors and officers when the company cannot indemnify them (for example in insolvency).

• Side B: Provides reimbursement to the company for losses it pays on behalf of directors/officers (i.e., when the company indemnifies them).

• Side C (Entity/Corporate Cover): Protects the company itself for certain claims (typically securities claims in public companies) against the company as an insured entity.
  Understanding which side(s) your policy covers is crucial to knowing exactly how protected the individuals and the company are.

Should Your Organisation Buy D&O Insurance?

If your organisation has directors or officers (including board members, senior executives), the answer is likely yes. Some points to consider:

• Are your leaders accountable to shareholders, investors, or regulatory bodies?

• Do you operate in a regulated industry, or one where governance, disclosures or fiduciary duties are under scrutiny?

• Are your directors and officers exposed to employment liability, breach of duty, mis-management claims, or third-party oversight?

• What is the size, complexity, and risk profile of your business? Small and medium-sized enterprises may think they are too small for D&O — but in fact legal and governance actions can hit any company.

• What indemnification arrangements exist? If your company cannot fully indemnify your directors/officers, you may need robust Side A coverage.

How Much Cover Should You Purchase?

Amount of cover varies widely depending on industry, size of the company, risk exposure, jurisdiction, prior claims history, and other factors. Some guiding thoughts:

• Choose limits that reflect the potential cost of defending and settling a serious claim (which could run into hundreds of thousands or millions of dollars).

• Ensure your policy covers the kinds of claims you face (regulatory, shareholder, employment) and offers the “sides” you need.

• Consider if additional endorsements or limits (run-off cover for past directors, global exposures, extra entity cover) are required for your business.

• Premiums may be a modest fraction of your leadership cost, but failing to provide cover may expose personal assets, board recruitment and corporate health.

FAQs

Q1. Who is covered under a D&O policy?
Typically current and past directors and officers of the company, sometimes key managerial employees and often the organisation itself (depending on cover side).

Q2. Does D&O insurance protect my personal home or savings?
Yes — when the cover includes Side A (individual cover), the policy protects personal assets of insured directors/officers for claims they face in their capacity as leaders.

Q3. If my company indemnifies me for a claim, does D&O still matter?
Absolutely — Side B (and often Side A) cover means the company gets reimbursed and you are protected even if indemnification is limited or the company is insolvent.

Q4. Can a company operate without D&O insurance?
Yes—but the risks are significant. Directors may demand personal assurances, be less willing to serve, or require personal surety. The company may struggle with governance, recruitment, or backing.

Q5. How often should I review my D&O cover?
Annually or whenever business structure, regulation, risk profile or leadership changes significantly. Claims and regulatory environments evolve rapidly.

Final Thoughts

Directors and Officers insurance is far more than a box on your risk-management checklist — it’s a fundamental component of corporate governance, leadership protection and organisational resilience. By providing defence cost cover, indemnification protection, and personal-asset protection for your key leaders, a well-structured D&O policy helps you attract talent, manage risk, and operate with confidence. Ensure you assess your exposure, choose the right cover sides, set appropriate limits, and review regularly.

Want expert advice tailored to your company’s leadership structure, risk exposure and regulatory environment? Fill out the form below to get a personalised D&O insurance solution from our network of specialist carriers. Secure your leadership-team protection today.