Enhancing your multinational D&O coverage

Many companies view their directors and officers liability (D&O) insurance as global, given that most policies include a territory clause covering claims worldwide where legally permissible. However, does this provide adequate protection to your directors and officers?

Executives often prefer that defense and investigative costs, as well as settlements and court awards, be advanced in the jurisdiction where these expenses arise. For subsidiaries outside the US, which are often small, requiring executives to pay for their own defense costs and be reimbursed can deter qualified individuals from serving on those boards.

Locally admitted D&O policies can bridge coverage gaps

Typically, D&O policies do not specify where claims payments will be made, due to legal complexities. Still, there are a number of situations when companies should consider supplementing their D&O program with local insurance placements, including:

Jurisdictions prohibiting non-admitted insurance: In these countries, a global policy cannot legally pay claims where the investigation and defense occur.
Unclear or absent corporate indemnification rights: Where indemnification and advancement rights are uncertain, local directors’ and officers’ personal assets may be at risk.
Compliance with local premium tax requirements: Local policies help address tax obligations by having the insurer collect and remit taxes on behalf of insureds.
Desire for local coverage nuances: Some companies or boards prefer coverage tailored to specific local legal or regulatory environments.
Frequent claims in a jurisdiction: Local carriers with claims-handling expertise can better manage jurisdiction-specific issues.

It is important to note that not all countries require local D&O insurance, unlike property or bonding coverages.

Assessing the need for local D&O policies

To determine whether your company would benefit from a local D&O policy, consider the following questions:

In which non-US countries do you operate?
Which, if any, of these countries prohibit non-admitted insurance?
Do you have local subsidiaries, offices, directors, or officers in those countries?
Are local indemnification and advancement rights available in these countries?
Do you generate significant revenue in those jurisdictions?

If local coverage is needed, options include:

Linking locally admitted policies to your primary D&O program, sharing limits with local “fronted” policies
Utilizing Lloyd’s freedom of services (FOS) policies to issue locally admitted coverage across multiple jurisdictions
Creating a “wrap” program that separates US and non-US risks, with local policies issued on a tie-in basis
Purchasing standalone local policies with separate limits, which may be necessary in certain markets — like India or Brazil — due to reinsurance constraints.

Please note that insurers typically charge administrative fees for local policy placement, and local premium taxes apply in addition to allocated premiums.

We recommend reviewing your D&O insurance program annually and whenever acquiring foreign operations or establishing new subsidiaries abroad.

The team of specialists within Marsh’s FINPRO Practice have the multinational expertise to help you design a program tailored to your needs. For more information, contact your Marsh representative.

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Article,Featured insight

Enhancing your multinational D&O coverage

Locally admitted D&O policies can bridge coverage gaps

Assessing the need for local D&O policies

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Enhancing your multinational D&O coverage

Locally admitted D&O policies can bridge coverage gaps

Assessing the need for local D&O policies

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Related insights

A high dose of uncertainty: Navigating pharmaceutical tariffs

Increased filings and underwriter appetite mark IPO landscape

Risk in Context Podcast: Uncovering risk realities for real estate and hospitality companies

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