Who Buys D&O and Why?
Nearly all Plc companies buy D&O because it helps them recruit the best board members and it safeguards shareholder value. It is an accepted element of good corporate governance. Insurance industry research states that as company size reduces so does the take up of D&O insurance.
This is an inverted approach because the smaller the company, the less their assets thus the greater their need for financial support in the event of legal action or investigation.
Running a business is complex and regulations are constantly evolving and it is difficult to keep pace with everything. Even decision made with the best intentions can receive scrutiny and litigation is on the increase. Moreover, any legal action or investigation need to be responded to and proving innocence can be a very costly business. The bulk of D&O claims are incurred in legal defence costs which without the insurance backing would need to borne by the company.