Why The D&O Market Will Get Harder
If you have your finger even remotely on the pulse, you will know that one of the major trends in 2020 going into 2021 was how data breaches were going to affect directors’ and officers’ liability claims.
According to a new report by Allianz Global Corporate & Specialty (AGCS), “outside the U.S., securities class actions are being filed in record numbers and the threat of facing an action has increased in many jurisdictions – notably in Australia and Canada.”
The AGCS report identifies five “megatrends” going into this year:
- Securities class action activity and COVID-19 impact;
- Global economic developments and insolvency exposure;
- The D&O exposures of privately-held companies;
- The impact of diversity, climate change, and environmental and social governance (ESG) factors;
- Cyber attacks
“Often the aftermath of data breaches has been devastating to the companies affected, including fines, costly breach notification procedures, business interruption, and intensely negative publicity,” the report continued.
So, how does this all affect directors’ & officers’?
The consequences of these megatrends will mean that directors’ and officers’ around the country are at an increased risk of getting sued over potential failures to properly protect their firms against cyber risk.
Moreover, COVID-19 has led to a majorly increased risk of insolvency – something that the report covers by stating, “Insolvency is a key cause of D&O claims, as insolvency practitioners look to recoup losses from directors. There are many ways that stakeholders could go after directors following insolvency, such as alleging that boards failed to prepare adequately for a pandemic or for prolonged periods of reduced income.”
These risks aren’t exclusive to larger, publicly traded companies either – as directors and officers in private firms face lawsuits over employee related matters.
The aforementioned “megatrends” of diversity, climate change, and ESG factors will likely lead to an increase in civil lawsuits. These lawsuits, if successful, could completely put a firm out of business.
Though this all sounds scary on the surface, there are ways to mitigate risk.
Contact one of our licensed experts today at 905-696-9090 or simply email us to find out how we can help you stay protected.
Source: Canadian Underwriter