Date of issue: 25th February 2004

New Guidance On Directors' Insurance

Chartered accountants Clement Keys, Birmingham is backing a new initiative by the accountancy, legal and insurance professions which aims to help company directors offset some of the risk attached to their position.

The Institute of Chartered Secretaries and Administrators (ICSA) has launched a special
Guidance Note, which outlines the key provisions typically contained in directors' and officers' liability cover.

The aim of the ICSA Guidance Note - which has been developed in conjunction with the City of London Law Society, the British Insurance Brokers Association and the Association of British Insurers - is to help directors gain a better understanding of the nature of directors' and officers' insurance.

"As our society becomes increasingly litigious with numerous laws under which legal action against directors can be brought, this kind of support is very welcome," says Clement Keys, partner Ian Yorke.

"The onus is on directors to defend claims so while the Guidance Note is not intended to be a substitute for seeking professional advice, it provides a sound basis from which directors can research insurance cover and ensure it meets their specific needs."

The ICSA Guidance Note serves as a useful checklist, highlighting the major issues that prospective executive and non-executive directors should consider. It also enables existing directors to review their insurance and will help those looking to move companies to evaluate the cover provided by prospective employers.

Among the areas the ICSA Guidance Note highlights for consideration are:

• Who is covered? For example, past and present directors and 'outside directors' who sit on boards outside the insured company or group
• What happens in the event of acquisition?
• The period of cover and process for notifying new director appointments
• 'Run off' cover, ie. protection for individuals who retire against claims relating to their period of office, and how this is applied
• What constitutes a claim?
• Extent of cover - including restrictions, exclusions and conditions
• Amount of cover - ie. the monetary limits per claim and per year

"There is no standard directors' and officers' insurance policy so it is important that directors are aware of their liabilities and satisfied their insurance cover provides adequate protection," adds Ian Yorke.

The Guidance Note is available on the ICSA website