Royal commission adds to D&O problems
The Hayne royal commission into financial services misconduct is adding to insurer caution in the embattled directors’ and officers’ market. Insurers are closely monitoring commission outcomes amid concerns around possible impacts on already unprofitable financial institutions’ portfolios, Aon Financial Services Group Director Eden Fletcher said. “There has been an attempt by some insurers to ring-fence their exposure to royal commission issues through the introduction of exclusionary language onto financial lines insurance policies for AFSL holders with a royal commission exposure,” he said. Exclusions could create uncertainty for organisations and directors and should be resisted, or at least “challenged and interrogated closely” in conjunction with any notifications relating to the royal commission that may have been made under a policy, he said. The royal commission has turned up the heat on Australia’s largest financial institutions, including AMP and the Commonwealth Bank and will examine insurance providers in September. AMP has already faced the threat of five class actions after revelations during hearings caused its share price to plummet. XL Catlin Product Leader of Management Liability Ewen McKay says the company will continue to assess each insured on their merits and provide coverage according to technical underwriting criteria. The market for D&O Side C cover generally has seen prices increasing and capacity reducing amid rising securities class action costs. “Due to the revelations brought about by the royal commission, some companies may now be facing additional challenges in obtaining Side C coverage and insurers are generally becoming more wary,” Mr McKay told insuranceNEWS.com.au.