D&O liability insurance in demand from Banks

With increasing scams, NPA’s in Banking sector there has been a significant rise in the demand for Directors & Officers (D&O) liability cover. Bank officials said that legal expenses incurred for engaging lawyers to defend serving/ retired officials and present/ former directors are going up in those cases. Hence, the need for enhanced D&O covers. A senior public sector bank official said his bank is planning to increase its D&O cover five-fold to Rs.100 crore in the backdrop of instances of diversion of loans and frauds by borrowers coming to light in the banking sector. “The premium that we paid for our current D&O cover was less than 1 per cent of the sum insured last year. This year the general insurer said that the premium would go up substantially due to increase in the number of cases that bank officials and directors have got embroiled in loans turning bad,”. According to the International Risk Management Institute, D&O liability insurance provides cover to directors and officers for claims made against them while serving on a board of directors and/or as an officer. In effect, the policies function as “management errors and omissions liability insurance”, covering claims resulting from managerial decisions that have adverse financial consequences.