D&O Insurance Considerations as Regulatory Climate Shifts

Recent legislation increased the SEC’s power to collect certain penalties from persons and entities that violate securities law, and that increased power may affect buyers of directors and officers liability (D&O) insurance, according to an article by Marsh McLennan. A section of the recently passed National Defense Authorization Act amends the Securities Exchange Act and essentially voids key outcomes from two Supreme Court Cases,  Kokesh v. SEC and Liu v. SEC, codifying the SEC’s ability to obtain repayment of illegally gotten gains and pursue other forms of relief against securities laws violators. According to the Marsh article, the Biden Administration is expected to be more enforcement focused and insured parties should review their D&O policies to consider their coverage limits, whether the traditional six-year period is sufficient when buying runoff coverage, or if the runoff period should be extended to 10 years, and whether they need to purchase entity investigation coverage.