Mumbai: The fraud at Satyam Computer Services Ltd has seen an increase in demand for directors’ and officers’ (D&O) liability insurance, with at least 500 companies in India opting for this cover recently.
A D&O cover is designed to protect directors and officers of a company for any wrongful acts that include misleading financial statements and mismanagement of funds, in respect to their potential exposure for the personal liability which can arise in the course of performing their duties. It also protects the company in respect of payments which it is legally permitted to make on behalf of its directors or officers.
Enquiries about D&O products have seen a jump of more than 50%.
Trouble-hit: The headquarters of Satyam in Hyderabad. Racha Ramesh / Bloomberg
Earlier, awareness for this product was quite low and was from large companies, mainly from those that had private equity and institutional investors. Now even smaller companies are opting for D&O against any possible liabilities.
Sanjay Kedia, managing director and country head at Marsh Insurance Brokers, said: “Post-Satyam many small and mid-sized companies have started showing a lot of interest in this product. Also, the larger ones are making sure the coverage is enough. On an average, listed companies have been taking covers up to Rs25 crore. The premium for which would be around 0.5% of the cover. This cover could go up to Rs500 crore depending on the company’s size.”
Apart from companies from possible risks from within, even independent directors in India are becoming increasingly demanding such protection before taking on any assignment. With increasing demand, the premium rates are also expected to rise.