Zurich published the following post on their website: “Directors and officers are facing growing risks, not only in their own countries but globally, according to international Directors & Officers Liability insurance expert Mr Paul Schiavone, Chief Underwriting Officer of Management Liability Insurance, Zurich Global Corporate, in London. He cites the Rio Tinto-Stern Hu case in China as an example of the international threats Directors and Officers now face.
Mr Schiavone presented at the Zurich Financial Lines Forum in Sydney on Tuesday, 20th April.
Mr Schiavone said Government activism, highlighted by increased vigilance by securities regulators and the anti-bribery scandals in recent times, is an emerging risk.
“Directors and Officers must be cognisant of the fact that they are at risk from governments beyond their home government, which can cause many issues. The United States Foreign Corrupt Practice Act and the Chinese case against Rio Tinto come to mind.”
He sees shareholder activism as the next emerging issue. “We are seeing an increased number of shareholder resolutions and claims against companies, ranging from compensation to mergers and acquisitions to climate change, “Mr Schiavone said.
“Once passive shareholders are now realising they have a voice and lawyers are helping them exercise this new-found strength. In the US we are seeing lawyers actively pursue non-US institutional investors to bring law suits in the US against both US and non US companies,” he said.
“This leads me to the so called F-Cubed cases in US courts, where non-US domicile companies are being sued in the US by non-US shareholders who bought their securities on non-US securities exchanges. Many see this as forum shopping, but, as of now, non- US companies are being brought into US courts.”
Mr Schiavone believes pollution and climate change are tomorrow’s next big issue.
“There are a number of government resolutions dealing with how companies must deal with disclosure to shareholders on their carbon footprint. Companies need to start addressing climate change issues with their company or shareholders and third party activists will do it for them.”
International program business, both on a compliance and regulatory basis, is another emerging issue.
Mr Schiavone said, “We are seeing governments becoming more aware of the insurance tax implications regarding international programs. Also, would a Director or Officer want to find out that their global Director and Officers policy cannot pay for their defence costs from a government claim in China, Mexico or Brazil AFTER they have already been arrested? Not a great scenario.” Sourced from Zurich’s website.
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