This year’s Insurance Growth Report highlights M&A trends in 2023 and assesses the opportunities for organic growth ahead in a climate of uncertainty.
UK Directors & Officers defence practice 2024
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We understand the serious reputational, financial and personal repercussions that D&O claims can bring for individuals, their companies and their insurers, and the importance of resolving these claims sensitively and expeditiously.We recognise the importance of supporting and enhancing the commercial partnerships between clients, brokers and insurers, and have wide-ranging sector expertise working with all parties. The evolving D&O landscape
The Directors and Officers (D&O) liability insurance market has experienced a turbulent couple of years due to a reduction in capacity, more restrictive conditions and rising premiums. Whilst the market is now thankfully showing signs of stabilisation, the risks facing D&Os continue to increase but defence costs inflation can be controlled by using an appropriately experienced law firm for defence representation. We can leverage our regional reach by using the expertise of our D&O teams in London, Bristol, Manchester and Glasgow to tailor to your needs. We often pair this with strategic global specialist input where appropriate.
karen.boto@clydeco.com Karen Boto Partner, London
Bradley.baker@clydeco.com Bradley Baker Senior Associate, London
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When considering how directors of SME businesses perceive risk, it is important to be aware of their different industry backgrounds, to understand their emotive and personal connection and to help guide them through the process, discussing the available options (negotiation, mediation, litigation) before pursuing a course of action that delivers the optimal result for them. Key risks facing individuals include: Key risks for D&Os
Health & Safety Protecting the health and safety of
Cyber Attack & Data Loss Cyber risks are ever-evolving and with the availability of (AI) tools, cyber threat actors are beginning to integrate AI into their operations making such attacks more potent and adding further pressure on D&Os to implement cybersecurity controls and to react efficiently and effectively in the face of an attack. This goes hand in hand with data loss, significant fines can be issued by data protection authorities following a breach and the law is still developing on claims from data subjects.
Regulatory Breach There are a host of regulators who are increasingly exercising their supervision and enforcement powers, all contributing to the regulatory space being a difficult one to navigate for D&Os. In the UK, FCA enforcement activity remains a substantial exposure and the burden has increased this year with the introduction of the Consumer Duty, which sets higher expectations for the standard of care that firms provide to consumers. Also, with ever expanding ESG reporting requirements being introduced, D&Os need to be aware of their obligations in this area.
employees, or members of the public who may be affected by work activities, is an essential part of risk management and must be led by D&Os. 2023 saw highly publicised fines alongside a noticeable uptick in enforcement notices issued by the Health & Safety Executive (HSE) and reports of the HSE’s impressive 94% conviction rate of individuals.
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Key risks for D&Os
Knowing key risks is crucial and essential for proactive risk management, informed decision-making, and maintaining organisational resilience in the face of uncertainty.
Systems & Controls Effective systems and controls are vital to prevent and detect breaches of sanctions laws. In recent years, we have witnessed financial regulators imposing significant fines for a range of systems and controls failings, demonstrating the importance of such controls in preventing insider trading, money laundering, bribery and fraud, amongst other things.
Bribery & Corruption There is an increased focus by prosecutors on bribery & corruption and internationally coordinated investigations. In addition to direct prosecutions against D&Os, the ‘failure to prevent’ regime in the UK’s Bribery Act (plus the Criminal Finances Act 2017 and the Economic Crime and Corporate Transparency Act 2023) could see follow on prosecutions against D&Os following cooperation by the entity to secure a deferred prosecution agreement (DPA). Insolvency Insolvency-related claims have always been a large source of claims against directors in the UK, but the risk of claims has increased as insolvencies have rocketed in recent times, following all-time lows during the pandemic. Further, during difficult economic times, there is a higher risk of fraudulent, dishonest or wrongful actions – this could all lead to more actions against D&Os for breaches of insolvency legislation and the duties they to the company, in addition to disqualification proceedings, which have increased significantly in the UK, with higher bans imposed, alongside an increase in criminal prosecutions and the imposition of civil compensation orders.
Breach of Sanctions Since the Ukraine crisis, the sanctions regime has ramped up. For D&Os, civil monetary penalties may now be imposed by the OFSI who can now publicly report a breach leading to reputational damage. Exposure to enforcement actions may increase further as a result of a new unit, (OTSI). The OTSI is intended to play a pivotal role in assisting businesses in complying with sanctions, investigating potential breaches, issuing civil penalties and referring cases to HMRC for criminal enforcement, where necessary.
What we are known for
• Protection of the Limits: Choosing a firm that is willing to apply insurer friendly rates will mean that the limits of indemnity available under your D&O policy will go further. As D&O insurance is expensive to obtain, this may allow you to absorb a higher premium and obtain access to larger limits of indemnity. • Quality Control: Your D&Os will be represented by the most experienced lawyers in the market. We will be pre-approved by your insurers where we are on their Panel. We always strive to achieve the best outcome for you and your D&Os. • Operation of the D&O Policy: We can provide early assistance and advice regarding the scope of cover likely to be available and any limitations. Allowing for any uninsured exposures to be effectively managed and mitigated. • Seamless Claims Process: Due to our wide-reaching panel appointments, we have a full appreciation of insurers’ billing requirements, and will act in accordance with your insurers’ litigation guidelines, speeding up the defence costs evaluation and approval process, resulting in a more efficient claims service being delivered. • Adequate Reserves: We understand the importance of providing vital information to insurers on a regular basis, allowing accurate reserves to be maintained throughout the entire life cycle of a claim.
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We recognise that risks to board members span multiple arenas and as such have ensured our D&O team encompasses specialists across multiple teams, including EPL, financial crime and safety health and environment. We know that this is an SME focussed product for both the D&O and EPL claims market, so we continually develop our understanding of what this means for you. Our expertise in defending D&Os
D&O We have defended claims against D&Os whether they are managers of public or private companies, insurance companies, financial institutions,non-profit entities, investment advisers, pensions funds, hedge funds,asset managers as well as limited and general partnerships. These claims frequently involve complex issues relating to insolvency,company legislation,
EPL Our team covers all aspects of employment law, including disciplinary matters, terminations, redundancy programs, restructuring, and outsourcing. We also handle working hours, leave entitlements, shift patterns, zero-hours contracts, non- employed contract workers, TUPE, data protection, equal opportunities law (including diversity and inclusion training), maternity and family issues, workplace discrimination disputes, and emerging risks like Me Too, diversity and inclusion, climate change, and cyber incidents/data breaches.
Criminal In the UK, directors face a wide range of offences which could lead to criminal prosecution leading to a conviction and a fine or other penalty. Corporate criminal offences, such as the ‘failure to prevent’ offences raise the stakes for corporates and may encourage whistle-blowing and self- reporting, thereby exposing directors to subsequent prosecutions. Health & Safety Within the UK, our safety, health and environment group is one of the market leading teams in the field
financial services regulation, criminal andadministrative proceedings.
of corporate manslaughter and gross negligence manslaughter.
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Our recent D&O expertise includes:
Advising and defending D&Os in respect of
Defending directors of a collapsed Premier League Club in relation to multiple claims by liquidators.
Advising a former CEO of an insurance company to respond to enquiries from the administrators relating to the cashflow
Representing D&Os in criminal prosecutions and investigations, ranging from allegations of bribery and corruption, to breaches of health and safety laws.
Acted for Ryan Reich in Serious Fraud Office criminal proceedings in relation to Libor manipulation allegations. The client
Acting for a senior manager at a major European investment bank in relation to bribery and corruption related issues and advising on all aspects of responding to an internal investigation.
claims brought pursuant to the
Insolvency Act 1986, including wrongful trading and misfeasance.
arrangements and payments to third parties.
was acquitted at Southwark Crown Court.
Acting defence counsel for D&O insurers of residential management associations in relation to claims by shareholders and associated third parties as a result of alleged wrongful acts by several of its directors over representations regarding various leaseholder arrangements. Defending action against a Director of a national property management business regarding statements made and financial information given to leaseholders of several properties by successor managing agent company.
Advising and defending D&Os and their companies in relation to all types of shareholder disputes, including claims brought under ss90(1) and 90A FSMA and U.S securities class actions.
Defending a derivative claim brought under s261 of the Companies Act 2006 by a company against its former CEO for alleged breaches of his contractual and director's duties.
Defending an unfair prejudice petition brought against a director/majority shareholder of a creative service provider to the fashion industry.
Defending a former director concerning alleged breaches of his fiduciary duties under s.172-177 of the Companies Act 2006.
Advising NEDs on the liability risks of Climate Change, through scenario planning.
Providing coverage advice in relation to multi party litigation arising out of the sale of a subsidiary of a multi- national to a third party in Australia and allegations of
Advising on emerging risks facingD&Os and
Defending employment claims made against D&Os relating to allegations of discrimination, sexual misconduct and harassment.
Advising and defending D&Os in disqualification proceedings and other regulatory investigations .
Defending allegations of poor risk management by D&Os, such as failing to adequately protect against cyber attacks/data breaches.
their companies, including issues
relating to COVID-19, climate change, Brexit, ESG related issues and
technological advancement.
dishonesty against various directors.
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Added value and products
We deliver more than just legal advice; we help develop your knowledge and understanding of issues and topics of importance to you and your insureds. We have developed a range of innovative technology led products to enhance our D&O offering and to provide the highest level of service to our clients.
Management Liability 24/7 helpline
Customisable client portal
D&O tracker
Webinars, in-house training and legal updates
Desktop dilemmas and case surgeries
Mentoring and coaching
Management Liability Helpline
Upon agreement, we can offer a dedicated 24/7, 365 days a year, UK Management Liability helpline service to ensure you have full access to our range of experts who can manage incidents and queries from the moment they occur.
Key Features
• Providing immediate and effective incident coordination. Where the query involves a cross jurisdictional element, our global presence allows us to offer you a seamless service in all regions across the UK and will guarantee you access to our lawyers who can guide you through the legal and regulatory issues, wherever and whenever you need it. • We are focussed on engaging with you and seek to achieve a cost-effective and expedient solution in a time of crisis. • In the event you need immediate further legal support, our combined team is uniquely placed to assist in bringing the situation to a quick and effective resolution. We have developed the expertise and methodology to manage the threat and mitigate the risk, with a view to reducing the resulting damage and getting organisations back up and running as quickly as possible.
D&O Tracker In 2024 we are due to release our revised D&O Tracker, a central tool that pulls together the latest regulatory fines and penalties providing you with real-time data and visibility of trends to help you mitigate risk.
Key Features • The D&O Tracker captures fines from four major UK regulators, including the Serious Fraud Office, Financial Conduct Authority and the Information Commissioner’s Office. • It also records compensation and legal costs orders, as well as the term of any custodial sentences against directors. • The tool underlines the sheer scale of the fines, helps to understand the dangers facing SMEs and provides a tool to assess the appropriate level of cover needed.
Above is a snapshot of our GDPR and Enforcement tracker, already launched and being used by multiple clients across the world.
Empower your business with our customisable client portal We have a dedicated and sophisticated knowledge team who can work with you to create a co-branded knowledge portal to offer to your insureds. Streamline communication, securely share documents, and enhance collaboration . Below is a snapshot of a recent cyber portal we created for an insurer and their corporate clients.
If you have any questions or queries, please do get in touch with a member of the team.
50+ Offices worldwide* 2,500 Legal professionals 4,000 Total staff 1,800 Lawyers 440 Partners
www.clydeco.com
*includes associated offices Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2021
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