Corporate indemnification and insurance policies designed to protect Directors and Officers (D&Os) in mining can be complex and there are many variations of coverage and policies to consider before choosing one that can adequately protect your interests, particularly when it involves conducting work internationally
Before you purchase a D&O insurance policy for international coverage, here are some considerations you should take into account:
Who provides insurance coverage?
A number of insurance companies offer D&O insurance for publicly-traded companies. Most of these insurers underwrite the coverage as a specialty class of business employing highly trained underwriting and claims personnel. The companies providing D&O coverage are typically large, diversified insurers with subsidiaries or branch operations in Canada. Other markets include underwriters at Lloyd’s of London and insurers based in Bermuda, which due to its tax status, has attracted substantial insurance capacity aimed at the re-insurance market and very large risks.
The major participants in the Canadian D&O market are insurance companies of considerable financial strength and sound reputations for service, knowledge and claims settling ability. Companies are usually rated by S&P and should have a minimum rating of ‘A’ or higher.
International Subsidiaries – Admitted Insurance
Most policies offer coverage worldwide including suits that are brought anywhere in the world. Companies with foreign operations may find that the worldwide policy lacks adequate protection for Directors and Officers of foreign incorporated subsidiaries. Local, regulatory environments are evolving and giving rise to new requirements and risks which may not be covered under the policy.
Possible Risks of Non-Admitted Coverage:
- D&O lawsuits can arise from an international company’s foreign operations and subsidiaries.
- Local requirements require D&O policies to be issued by a locally licensed insurer. In some cases severe fines and penalties are possible.
- Indemnity payments by the parent to individuals in foreign jurisdictions may have adverse implications for the company.
- Local law prohibits the parent company policy from paying claims.
- The local subsidiary may not be able to indemnify D&Os leaving personal assets exposed.
- Regulators the world over are intent on enforcing compliance with local laws and regulations.
- Local laws and customs may not be effectively addressed or even considered in the policy wording.
- Evolving trends in the international regulatory landscape create an exposure for non-contemplated liabilities.
Solutions for Protecting Subsidiaries and D&Os in Foreign Jurisdictions
Some insurers can provide a global D&O program, integrating locally admitted policies with the global policy. Many different coverage options are possible and the countries in which local coverage can be arranged will differ between insurers. These coverage arrangements help to mitigate risks by providing:
- Coverage that is admitted locally and complies with local laws and regulations.
- Access to local claims specialists who are experts at dealing with claims in the local jurisdiction
- Policies can be issued in local languages, often a requirement.
