Traditional D&O coverage outstripped by new risks: Willis

General professional liability insurance may not represent enough protection for board members and senior executives to deal with a wave of emerging exposures, notes a recently released report from Willis Group Holdings.

One of the prime threats is cyber risk, states Willis’ Executive Risks: A Boardroom Guide. “The risks and dilemmas posed by serious data breaches apply to board directors of all businesses,” says Mark Wakefield, executive director of FINEX Global, the broker’s financial, executive risk and professional liability business division.

“Courts generally are likely to take the view that directors have a duty to gain a sufficient understanding of the nature of the risks facing their businesses, including cyber risks. Ignorance is still no defence.”

Calling 2011 the “Year of the Breach,” Willis notes in the report that “companies of all sizes struggled with ‘cyber incidents,’ ranging from malicious intrusions to employee negligence. Indeed, big corporations are not the only ones that are vulnerable to hackers. Half of all U.S. companies that have experienced data breaches have fewer than 1,000 employees.”

The report also cites the U.S. Securities and Exchange Commission (SEC) issuance of disclosure guidance in October 2011, which recommended that public companies disclose, among other things, cyber incidents.

“Against this backdrop, the D&O policy has had to move with the times, as buyers and brokers seek cover for new and previously untested areas of liability,” Wakefield adds.

“Willis has responded with the introduction of DARCstar in 2011, which provides ‘all risks cover’ that responds better to today’s quick-moving environment.”

Willis’ Executive Risks: A Boardroom Guide is an 18-chapter guide to legal developments, risks and insurance solutions relevant to board directors and senior company officers, published in connection with White Pages.