Thursday’s third session addressed the D&O risks and insurance issues that globalization poses for U.S. corporations doing business through subsidiaries abroad.  The Panel discussed the issues to keep in mind when placing D&O insurance for a global corporation and its foreign subsidiaries.

Moderator:

Carol Zacharias, Esq., Senior VP and Chief Counsel, ACE USA

Panelists:

  • Lee Lindsay, Esq., Senior VP, Aon Financial Services Group
  • Julian Martin, Executive Director, Willis Limited
  • Eugene “Tripp” Sheehan, Managing Director, Marsh
  • Edward Smerdon, Partner, Porter & Chamberlain

U.S. Corporations seeking to protect their boards at home and abroad have a variety of options available to them.  The Panel discussed the options available and suggested that the three main choices are use of a single policy, obtaining a policy in every jurisdiction in which the corporation has a subsidiary, or purchase of a “silver bullet” policy with all the bells and whistles.  With regard to “silver bullet” policies, the Panel cautioned that the corporation will need specific guidance from knowledgeable and experienced advisors, with at least one Panelist saying that there probably is no such policy.

The Panel also discussed some key issues to keep in mind when a corporation buys D&O coverage on a global basis, as follows:

  • The product needs to comply with local requirements for D&O cover.

    • Know the penalties for non-compliance with local requirements.

    • Consult counsel in the territory where your subsidiary is located.
  • Address those territories where there are greater exposures.

  • Keep in mind that not all territories accept the aggregation of limits clause.

  • Examine the tower and make certain that all insurers are accepted by the foreign territory.

  • Ascertain whether what is being bought is for the benefit of the main board or the foreign subsidiary.

  • Examine whether the corporation really needs global coverage or just the parent?

  • Sometimes the subsidiary should simply get their own policy offered by a carrier in their locality.

  • Lawyers/brokers/carriers have conflicting views on what cover is needed in different countries.

    • The question was posed, who is responsible for getting it right (i.e., the insured, lawyer, broker, carrier)?

The Panel seemed to agree that there is no “one size fits all” policy and that consultation with industry professionals when deciding on whether and what type of global coverage is required is almost always necessary.