\n<\/p>\n
JOHANNESBURG\/LONDON\/MUNICH\/NEW YORK\/PARIS\/SAO PAULO\/SINGAPORE\u00a0–\u00a0Media
Risk managers and their D&O insurers
\u00a0<\/p>\n “The actions and culture of
\u00a0<\/p>\n “This comes against the backdrop
Uncertain
The withdrawal of support measures
\u00a0<\/p>\n Market
The financial services industry,
\u00a0<\/p>\n Meanwhile, digitalization has
\u00a0<\/p>\n Heightened
Litigation risk continues to be
\u00a0<\/p>\n Since early 2020, a group of
\u00a0<\/p>\n Scrutiny over SPACs<\/b> \u00a0<\/p>\n So far the SPAC boom has been
\u00a0<\/p>\n Regulatory
\u00a0<\/p>\n SPACs carry a set of specific
\u00a0<\/p>\n In addition, a failure to
AGCS report identifies trends for risk managers,
brokers and insurers in the Directors and Officers (D&O) space. Pandemic-related insolvency risks have not yet
been fully averted, while risk of asset bubbles and inflation are a rising
concern. Shareholder
derivative suits in the US against foreign companies are becoming more frequent. SPACs are
on the rise …<\/p>\n","protected":false},"author":1,"featured_media":19519,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[60],"tags":[],"_links":{"self":[{"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/posts\/19518"}],"collection":[{"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/comments?post=19518"}],"version-history":[{"count":0,"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/posts\/19518\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/media\/19519"}],"wp:attachment":[{"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/media?parent=19518"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/categories?post=19518"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eodishasamachar.com\/en\/wp-json\/wp\/v2\/tags?post=19518"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nOutReach<\/a>\u00a0– 15 December 2021\u00a0<\/b>–\u00a0<\/b>Board members and company executives can be held liable for an
\nincreasing range of scenarios. Today’s market volatility, with the increased
\nthreat of asset bubbles and inflation, the prospect of a growing number of
\ninsolvencies due to the pandemic environment, together with rising scrutiny
\naround the environmental, social and governance (ESG) performance of companies
\nand the urgency for robust cyber resilience are key risks for Directors and Officers (D&Os)<\/a> to watch in 2022. <\/p>\n
\nshould also closely monitor potential exposures to US derivative actions and
\nother forms of litigation, while also not underestimating the challenges around
\nincreasingly popular SPACs (special purpose acquisition companies), according
\nto the latest edition of Allianz Global Corporate & Specialty (AGCS)’ annual D&O report<\/a>.<\/p>\n
\norganizations and their directors and officers are coming under heightened scrutiny
\nfrom a wide range of stakeholders, with litigation risk a primary concern,” says
\nShanil Williams, Global Head of Financial Lines at AGCS. <\/p>\n
\nof a stabilizing D&O marketplace, although capacity is still tight in some
\nsegments and many companies would like to buy more limits than the industry can
\noffer. The market remediation has advanced, including our own portfolio at
\nAGCS, and this will gradually ease the pressure that some of our clients are
\nfacing. We are adopting a cautious and disciplined underwriting approach and
\nneed to remain wary about the current volatile business environment and closely
\nmonitor loss trend patterns. However, the D&O insurance space is slowly,
\nbut surely, offering opportunities for profitable growth again in selected
\npockets \u2013 and we are eager to pursue these.”<\/p>\n
\ninsolvency issues continue to be key topic in the D&O space<\/b><\/p>\n
\nfor companies established during the pandemic sets the stage for a gradual
\nnormalization of business insolvencies in 2022.\u00a0The\u00a0Euler Hermes Global Insolvency
\nIndex<\/a>\u00a0is
\nlikely to post a +15% y\/y rebound in 2022, after two consecutive years of
\ndecline (-6% forecast in 2021 and -12% in 2020). While the wave of insolvencies
\nhas so far been milder than anticipated, mixed trends are expected across the
\nworld. In less developed markets, such as Africa or Latin America, the number
\nof insolvencies is expected to increase faster compared to more developed
\neconomies, such as France, Germany and the US, where the impact of the
\ngovernmental support is expected to last for longer. Traditionally, insolvency
\nis a major cause of D&O claims as insolvency practitioners look to recoup
\nlosses from directors. There are many ways that stakeholders could go after
\ndirectors following insolvency, such as alleging that boards failed to prepare
\nadequately for a pandemic or for prolonged periods of reduced income. <\/p>\n
\nvolatility, climate change and digitalization key issues <\/b><\/p>\n
\nbut also companies from other sectors, continues to face multiple risk
\nmanagement challenges in the current economic climate. Markets are likely to
\nbecome more volatile with the increased risk of asset bubbles and inflation
\nrising in different parts of the world. At the same time, more banks and
\ninsurers are expected to assign individual responsibility for overseeing
\nfinancial risks arising from climate change, while investors are paying closer
\nattention to the adequate and timely disclosure of the risk that it poses for
\nthe company or financial instrument they invest in. The tightening regulatory
\nenvironment, the prospect of climate change litigation or ‘greenwashing’
\nallegations could all potentially impact D&Os. Cases have focused on the nature of investments, although there is a rise
\nin litigation to drive behavioral shifts and force disclosure debate. <\/p>\n
\nfurther accelerated following Covid-19, creating enhanced cyber and IT security
\nexposures for companies. This requires firms’ senior management to maintain an
\nactive role in steering the ICT (information and communication technologies) risk
\nmanagement framework. “IT outages and service disruptions or cyber-attacks
\ncould bring significant business interruption costs and increased operating
\nexpenses from a variety of causes including customer redress, consultancy
\ncosts, loss of income and regulatory fines. Last, but not least, brand
\nreputation can also suffer. All this can ultimately impact a company’s stock
\nprice with management being held responsible for the level of preparedness,”
\nsays Jenny Wilhelm, Regional Head of Financial Lines Asia.<\/p>\n
\nlitigation risk in the US<\/b><\/p>\n
\na top D&O concern, in particular around shareholder derivative actions
\nwhich are increasingly being brought on behalf of foreign companies in US courts.
\n“A number of new lawsuit filings, the recent openness of certain courts to
\nextending long-arm jurisdiction, and a possibly record-breaking settlement
\nannounced in October 2021, point to heightened US litigation risk for directors
\nand officers of non-US domiciled companies,” David Ackerman, Global Claims Key
\nCase Management at AGCS emphasizes.<\/p>\n
\nplaintiffs’ firms has brought more than 10 derivative lawsuits in New York state
\ncourts on behalf of shareholders of non-US companies seeking to hold directors
\nand officers legally and financially accountable for various breaches of duty
\nto their corporations. The financial hurdles to bring suit in the US are
\nsignificantly lower than in many other countries, while US courts and juries
\nare considered more plaintiff-friendly than many others around the world. The
\nconsequences to directors and officers forced to defend themselves in
\nderivative litigation before US courts can be severe. In what may turn out to
\nbe a record-setting settlement for a US derivative lawsuit, in October of this
\nyear defendants agreed to pay a minimum of US$300mn<\/a> <\/b>to settle litigation brought in a New York state court by
\nshareholders of Renren, a social media corporation based in China, and
\nincorporated in the Cayman Islands, after allegations of corporate misconduct.<\/p>\n
\nAnother emerging risk in the global D&O insurance space comes from the growth
\nof so-called Special Purpose Acquisition Companies (SPACs), also known as
\n‘blank check companies’. These represent a faster track to public markets. Advantages
\nfueling the growth of SPACs over traditional Initial Public Offerings (IPOs)
\ninclude smoother procedures, less regulatory and process burdens, easier
\ncapital sourcing and shorter timelines to complete a merger with target
\ncompanies. During the first half of 2021, the number of SPAC mergers in the US,
\nboth announced and completed, more than doubled the full year total of 2020
\nwith 359 SPAC filings<\/a>, garnering a combined US$95bn
\nraised. The growth of SPACs in Europe may not match the scale of the US boom,
\nbut there is still a growing expectation that it will increase despite a less favorable
\ncompany law environment compared to the US. In Asia the market is slowly
\ngaining momentum with a significant uptick in companies in China, Hong Kong and
\nSingapore as a new route to accessing capital markets. <\/p>\n
\nlargely concentrated in high-growth industries such as technology, financial
\nservices and healthcare. Earlier this month, Grab – the car-hailing service in South East Asia, made its stock market
\ndebut on New York’s Nasdaq trading platform.<\/p>\n
\nscrutiny and enforcement over the SPAC sector have also increased after two
\nyears of booming activity. The scrutiny and lawsuits have piled more risk on
\nthe market for D&O insurance. One issue in Hong Kong is securing
\nliability insurance for SPAC directors and officers against incorrect
\nstatements and negligence. The cost of such coverage has materially steepened for
\nmany Chinese firms listed in the U.S. because of increased scrutiny and
\nactivism in recent years.<\/p>\n
\n‘insurance-relevant’ risks, and losses are already reported to be flowing
\nthrough to the D&O market as both the SPAC and the private target company
\ntypically obtain D&O coverage. “Exposures could potentially stem from mismanagement,
\nfraud or intentional and material misrepresentation, inaccurate or inadequate
\nfinancial information or violations of rules or disclosure duties,” says David
\nVan den Berghe, Global Head of Financial Institutions at AGCS. <\/p>\n
\nfinalize the transaction within the two-year period, insider trading during the
\ntime a SPAC goes public, a wrong selection of a target to acquire or the lack
\nof adequate due diligence in the target company could also come into play.
\nPost-merger the risk of the go-forward company to perform as expected or
\nfailure to comply with the new duties of being a publicly-listed company also
\nneeds to be considered.<\/p>\n<\/p><\/div>\n\n
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