Cost of D&O insurance continues to creep upwards

The cost of D&O insurance in Canada continues to rise and company leaders are becoming more informed about their exposure to risk and potential liabilities, says a survey by Spencer Stuart.
The Spencer Stuart Governance Lexicon 2007 contains entries on 19 countries with the aim of providing a reference guide on board structures in different markets.
Participating firms are surveyed on the key parameters governing the behaviour of individual directors and the board as a whole.
Like the U.S., personal liability of individual directors is gaining attention in Canada, primarily due to high-profile liability cases.
A recent class action lawsuit filed by former shareholders of a large Canadian company named several members of the company’s audit committee and claimed that these board members “breached their duties” when they failed to carefully scrutinize the company’s financial reports, according to a Spencer Stuart release.
In this turbulent judicial environment, the 100 companies in the Canadian Spencer Stuart Board Index reported a 26% rise in the cost of D&O insurance, according to a January 2007 Spencer Stuart release posted on the company site. [The release does not specify the year in which the 26% increase was reported; some sources suggest the figure is based on 2005 statistics.]
New standards and legislation have also crept onto boards’ radars.
“Canadian boards, like those in the U.S., have expressed concern over the increased costs of complying with new governance standards and legislation,” says information from the consulting firm.
The proposed “Multilateral Instrument 52-111 Reporting Requirements for Internal Control over Financial Reporting” poses concern “with issuers complaining that compliance would be costly and time-consuming and that the costs of compliance may be disproportionately higher for smaller companies.”