September 23, 2004 by Canadian Underwriter
Executives are increasingly looking to protect their personal assets through the purchase of stand-alone “side A” directors’ and officers’ (D&O) cover, according to a new study by international broker Willis.
The coverage, designed to protect directors and officers when the company cannot indemnify them, is increasingly being purchased by those in Fortune 1000 companies surveyed.
The average amount of stand-alone side A coverage was US$57 million, with a median of US$52 million, companies report. The heaviest buying was done by the largest firms (Fortune 100), with 60% reporting coverage, while 35-40% of Fortune 500 firms purchased some form of side A cover.
There are two types of buyers purchasing side A cover only, the study finds. This first are companies with clean claims histories who wanted to address only situations where they would not legally be able to indemnify executives. The second are those who have experienced claim(s) or who are in high-risk industries, who could not find broader coverage. For both groups, coverage ranged from US$50-$200 million.
However, most side A cover (87% of cases) was bought on an excess basis along with broader coverage for the company and its people. Such programs had attachment points ranging from US$10-$250 million and total coverage ranged from US$5-$200 million.