Importance of D&O insurance

With the growing number of bankruptcies in the world, increased shareholder activity in foreign markets and toughening of requirements by various stakeholders to comply with ESG policies, Directors & Officers liability insurance (D&O insurance) is becoming an essential tool. Such insurance policy provides legal and financial protection to directors in case of claims of negligence and allegations of mismanagement in their duties as an officer or board member.

The need for executive liability insurance was first discussed in the late 19th century. But, after the Great Depression, which began in the USA in Y1929, and the adoption of the US Securities Act in Y1933 and Securities Exchange Act in Y1934, providing for personal liability of executives for alleged wrongdoing, the introduction of D&O insurance began to gain relevance in American business communities. The first policy was issued by Lloyd's of London in Y1934 for "Macy's" - one of the largest and oldest retail chains in the United States.