Directors and Officers Liability Insurance in the Manufacturing Industry

Assurex Global recently published its 2023 Manufacturing Insurance Benchmark Report, one of several annual industry reports. The survey examines the insurance purchasing decisions of over 1,000 manufacturing clients of Assurex Global Partner firms.

The decisions made regarding directors and officers liability insurance (D&O) are very interesting. D&O insurance protects the individual members of the board of directors and management of a company from allegations that they mismanaged the company, resulting in adverse financial results. D&O covers claims made by a third party for alleged losses caused by management’s acts, errors, omissions, misstatements, or misleading statements. D&O policies are written on a claims-made basis, usually contain no explicit duty to defend the insureds, and cover monetary damages but exclude bodily injury and property damage. Sources of claims against the directors and managers of a manufacturing company can include investors, project owners, creditors, local or state officials, and a variety of others.

We received information on the purchase of D&O coverage from 258 manufacturing entities in our survey. Of the manufacturing firms in our survey that purchase D&O insurance coverage, 57 percent purchased only a $1 million limit.

Surprisingly, the purchase of the $1 million limit hovers around 65 percent until the firms’ annual revenue exceeds $100 million. Once the $100 million revenue level is exceeded, 44 percent of manufacturers purchase $5 million or more of D&O insurance.

Additionally, average D&O premiums have increased 37 percent compared to last year’s survey. The percentage increase is greatest for larger firms. Small firms actually saw a decrease of 19 percent compared to last year.

While the percentage of manufacturing firms in the survey that purchase D&O insurance is consistent with other industry surveys conducted by Assurex Global, the percentage of firms operating without D&O insurance remains surprising. Through their management activities and decisions, directors and officers of both private and public firms put their personal assets at risk. Absent D&O insurance, most companies do not have excess financial resources to protect their management team from litigation. The personal risk to individual directors can present them with devastating consequences in the event of a claim.

Click here to request a copy of the 2023 Manufacturing Insurance Benchmark Report. In it, you will find detailed information on the purchasing habits regarding various insurance coverages, broken down by size and type of manufacturer. The report provides valuable insight to help risk management professionals compare their own buying habits with others in the manufacturing industry.

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