NEDs (Non-Executive Directors )

Insurance is not a topic which sets the world on fire, but it is one of the most important areas for Non-Executive Directors (NEDs) to pay attention to. Unfortunately, this is an area that is frequently ignored. It is much discussed and often referred to but in my experience, rarely fully understood by either the insured or the regulator. However, insurance, like nuclear weapons, is something that you buy but hope never to have to use.

So why do NEDs pay little attention to the insurance coverage which may give them the lifeline they need to pay for the legal expenses involved in defending claims? The coverage which is so often ignored, is known as 'directors and officers liability insurance' (D&O) (as distinct from 'professional indemnity insurance'). This coverage provides protection from claims that may arise against individual directors for failing to discharge their duties. I've noticed several issues which may account for why many NEDs lack this coverage: