What Is Directors and Officers Liability Insurance?

Directors' liability insurance refers to the purchase by the company or the company together with directors and senior management. The insured directors and senior management have been accused of negligence or misconduct in the process of performing company management duties. (Including malicious acts, breach of loyalty obligations, intentional false or misleading statements in information disclosure, acts that violate the law) and be held liable for personal compensation, the insurer shall be responsible for compensating the director or senior management for expenses related to defense Legal expenses and insurance for reimbursement of civil liability that it should bear. In the broad sense of directors 'liability insurance, in addition to the above insurance liabilities, the insurance company should also be responsible for compensating the company's compensation to the relevant directors in accordance with the directors' liability and expense compensation system.

Directors' Liability Insurance

Directors' liability insurance is
The main factors affecting premiums include: business models, changes in business models
For listed companies, Dong Liability Insurance is a very targeted insurance plan. Especially for Chinese companies listed in the United States, Dong Li liability insurance is necessary "equipment" to deal with the special legal environment of the US securities market.
For example, the SEC has been approved for overseas companies since the second half of last year.
If an enterprise wants to insure directors' liability, the rate will usually take into account about 20 to 30 factors based on the case. For example, what is the market value of this company? What industry? Is the business model solid? What about corporate governance? How well does its internal control work? What kind of accountant does it use? How is its stock price performing? Is there any tendency for stocks to be shorted? Generally, in addition to reviewing its financial statements, the insurance company also communicates with the CFO, legal director and other responsible persons of the insured company, and even visits the client company's site to better understand the risks of the insured company.
Dong Liability Except
According to incomplete statistics, there are currently only about 5% of A shares

Director Liability Insurance

Domestic directors' liability insurance rates rose in January, up to 300% in half a year
Compared with the embarrassment of directors 'liability insurance of private enterprises rising sharply, the directors' liability insurance of overseas-listed state-owned enterprises has relatively little increase. State-owned enterprise directors' liability insurance premiums have not changed much. Small companies have basically not increased their prices, and larger-scale state-owned enterprises have raised their prices only symbolically, only 5% -6% or even lower.
As a listed company, its management is not the owner of the company, but it should have a sense of trust and fulfill its obligation of integrity. As a private enterprise, its owner's consciousness is relatively strong, but trust consciousness is weak. In this respect, state-owned enterprises may be more in line with the requirements of the capital market. Therefore, the preferences of different companies in the insurance market are different, which is reflected in the price.

Directors' liability insurance higher in the US than in China

In addition to the difference in premium levels caused by different types of enterprises, different capital markets face different premiums. The premiums of executive liability insurance for companies listed in the United States are much more expensive than in the mainland market. Because the listing thresholds of the two markets are different, the domestic market is a review system, and strict review itself plays a certain role in assessing insurance companies. The United States has a record system. Although the threshold is low, the supervision is very strict. The difference between the United States and A-shares is that the supervision of A-shares is external intervention and lacks the ability to repair itself. The US market has very strong self-monitoring capabilities, and making mistakes is very expensive.

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