D&O insurance is still in its relative infancy throughout Asia, but this is likely to change, especially in China. Risks and liabilities that didn’t exist in past years loom large for growing Chinese businesses as they become bigger, and more importantly, geographically broader and more complex enterprises that require sophisticated corporate governance standards. The risk of a shareholder action in Australia, a discrimination suit in Europe, a cyber-attack in Malaysia or a securities investigation in Hong Kong are real issues that boards need to mitigate. In Australia, for example, our claims data revealed a 375% increase in D&O claims since 2012.1 This is a dramatic rise in only 5 years’ time.
Chinese companies are fast becoming some of the largest multinational conglomerates in the world. But based on our data and experience in the region, AIG estimates that only about 10% of Chinese listed companies in the A share stock exchange have D&O insurance. This is a major corporate governance concern as Chinese companies expand around the world.
Without D&O insurance, the financial consequences of such an event could be catastrophic for the company, and devastating to the directors themselves at a personal level. As regulations change and investors become increasingly active in company operations, we see D&O insurance fast becoming a critical risk mitigation tool for corporate leaders in China.
To read more about the top reasons why Chinese companies need a D&O policy, read the full report here.
The content contained herein is intended for general informational purposes only. Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.
1 AIG Claims Data