Original title: A-share company’s intensive inquiry, director and liability insurance company’s underwriting ability tested
Our reporter Su Xianggao
On the one hand, A-share listed companies have received reports of resignation of independent directors, and on the other, insurance companies have received intensively inquiries from listed companies’ directors’ liability insurance. After the Kangmei Pharmaceuticals case, the liability insurance, which can disperse the risk of independent directors and other senior executives, continues to receive attention from all parties.
The reporter was informed that the recent A-share listed company director liability insurance inquiry letters received by insurance companies have increased significantly. Many people in the industry also said that recently, the popularity of Dong Liability insurance has soared. Wang Min, who previously worked in an insurance agency and has 17 years of experience in liability insurance, and is now a senior consultant at Shanghai Jianwei Law Firm, told a reporter from the Securities Daily that “the director’s responsibility is on fire.” He has received from insurance and brokerage firms. , Law firms and many other types of institutions have consultations on directors’ liability insurance.
Dong Li was in danger, and new problems emerged. First of all, due to the more professional director and liability insurance, most directors and supervisors of listed companies still have many misunderstandings about this type of insurance, and even do not know how to purchase it; secondly, after a large number of directors and liability insurance underwriting demand emerges, whether it is full or selective underwriting New issues such as how to prevent and control insurance risks and improve pricing capabilities are facing insurers.
Insurance becomes a new export to pass on the risk of independent directors
After the Kangmei Pharmaceuticals case, the phenomenon that tens of thousands of yuan of salary had to bear the risk of 100 million yuan “stunned” the majority of independent directors and triggered a “resignation wave” of independent directors. Some listed companies even saw their share prices plummet due to the resignation of independent directors. Some listed companies simply publicly “condemned” the resignation of independent directors.
“The main reason for independent directors to resign is because they are concerned about the risk of performing their duties.” Wang Min told reporters that under the new securities law, the risks of directors and supervisors of listed companies are mainly concentrated in three areas: one is regulatory risk, and two It is the internal risk of the enterprise, and the third is the risk of related parties of the enterprise. In the face of many risks, Dong Liability Insurance has become an important export for transferring risks.
Directors’ liability insurance is a kind of professional liability insurance with which directors and senior executives bear civil liability for the company and third parties as the subject of insurance. In European and American capital markets, the insurance coverage rate of this type of insurance generally exceeds 80%. However, its domestic insurance coverage rate is still low. According to statistics from insurance companies such as Ping An Property & Casualty Insurance, there are currently more than 600 companies insuring directors’ liability insurance in the A-share market, and the insurance coverage rate is only about 15%. There are still more than 3,000 companies that have not Insured for this type of insurance.
In fact, D&O insurance appeared in the domestic insurance market as early as 2002, but because the domestic regulatory environment is different from abroad, and the number of claims cases encountered by listed companies and those received by insurance companies are less, the market is superimposed. I don’t know much about Dong Liability insurance, and the insurance coverage rate of Dong Liability insurance has been low.
Since last year, the directors and liability insurance has received market attention again, mainly because the revised securities law has greatly increased the litigation risk of listed companies and directors and supervisors. As a milestone judicial practice this year, the Kangmei Pharmaceutical case has accelerated the market’s attention to Dong Liability Insurance.
Judging from this year’s D&O insurance coverage, according to the reporter’s analysis, as of November 25, a total of 155 listed companies have issued D&O insurance purchase plans this year, a substantial increase of 53% year-on-year. , November 17th series of reports).
According to the reporter’s understanding, a number of insurance companies have recently received intensively inquiries from directors and liability insurance companies. For example, Ping An Property & Casualty received formal procurement consultations from more than 50 listed companies within 5 working days. Directors’ liability insurance has also become an important tool for retaining independent directors of listed companies and participating in corporate governance.
Listed company
How to treat the director’s liability insurance?
Which risks of listed companies and directors and supervisors can be covered by director liability insurance? Under what circumstances does the insurance company not compensate?
From the perspective of the scope of protection, Wang Min said: “The insurance liability of directors’ liability insurance usually includes three parts, namely the personal liability of the directors and supervisors of listed companies, the company’s compensation liability, and the company’s securities liabilities. Among them, the personal liability of the directors, supervisors and supervisors and the company’s securities liabilities The legal basis can be found in my country’s company law and securities law, but there is no clear legal basis for the company’s compensation liability, and a basis for compensation needs to be provided through the company’s articles of association.”
The relevant person in charge of Chang’an Liability Insurance further explained to reporters that the insured persons of Dong Liability Insurance generally include individuals and companies. A great feature of directors’ liability insurance is that after underwriting, all senior executives (including directors and supervisors) are automatically listed as insureds, including all those who have left, are in office, or will serve as senior executives in the future. At the same time, it can also be agreed in the insurance policy that the liability can be extended to the directors, supervisors, and senior management of newly established or acquired subsidiaries. If you want to insure other non-executive positions, you can also carry out special extensions of responsibilities. The insured company includes all subsidiaries and branches.
At present, independent directors are more concerned about which personal risks can be protected by director liability insurance? In this regard, the relevant person in charge of Changan Liability Insurance stated that the scope of personal liability protection includes negligence, negligence or liability solely due to his status as directors and supervisors, as well as defenses, investigations, mediations, settlements, arbitrations, and costs incurred in judgments. Liability.
However, according to people from insurance companies, there are still many misunderstandings about the scope of protection of directors’ liability insurance by listed companies: one is that some listed companies believe that everything can be compensated by director’s liability insurance; There is no compensation for violations of laws and regulations. As long as listed companies or individuals do not violate laws and regulations, there will be no “incidents”, and it is useless to insure directors’ liability insurance.
In response to the first misunderstanding, the relevant person in charge of Changan Liability Insurance stated that there is currently a common misconception among domestic listed companies that they regard Dong Liability Insurance as a “life-saving straw” and believe that everything can be guaranteed, even as illegal profits.” In fact, Dong Liability Insurance will not escort deliberate illegal acts. This has also led to many disputes between the insurer and the insured, and this misunderstanding may not be changed in the short term.
In response to the second misunderstanding, the relevant person in charge of Ping An Property & Casualty stated that the insurance company does not compensate for all violations of laws and regulations by listed companies. The main reason is that “the insurance market standard directors’ liability insurance clauses are truthfully informed and illegal. The design of’severability’ means that there will be no compensation for the relevant subjects of the fraud, but the unknowing and unparticipants can continue to obtain relevant protection in accordance with the insurance contract.” In layman’s terms, the directors, supervisors and senior executives violate the law against listed companies. , In the case of ignorance or non-participation in violation of regulations, although it is still possible to be awarded compensation by the court, insurance companies can settle compensation for such cases.
In fact, the situation of being compensated for being implicated and spread is one of the important contents of the liability insurance protection. The directors, supervisors, and senior executives of some listed companies often think that as long as they perform their reasonable obligations within the scope of their rights and responsibilities, there will be no problems. Implicated is inevitable. The relevant person in charge of Ping An Property & Casualty said that my country’s liability for information disclosure violations is based on presumption of fault, that is, unless the corresponding director, supervisor and senior executive can clearly prove that he has fulfilled his duty of diligence and responsibility, he shall bear the corresponding responsibility. The award of compensation in the Kangmei Pharmaceuticals case well illustrates the risk of this type of performance by the directors and supervisors.
It is worth noting that although the domestic insurance industry and scholars generally believe that the director and liability insurance is beneficial to the improvement of the governance level of listed companies, the director and liability insurance does not “have benefits without harm to the governance of listed companies.”
According to Wang Min, domestic scholars generally believe that directors’ liability insurance has more positive effects on A-share listed companies, while foreign scholars have found that directors’ liability insurance has more negative effects on listed companies. This is in line with Chinese and foreign legal systems and corporate governance environments. The factor is related. From the perspective of positive effects, the directors’ liability insurance mainly has two major functions: “interest protection” and “external supervision”. For example, if a listed company is insured with directors’ liability insurance, some outstanding independent directors or senior executives may remain in office, and the external supervision of insurance companies can also improve the governance of listed companies. From the perspective of negative effects, it mainly includes “adverse selection” and “moral hazard.” For example, after insuring the directors’ liability insurance, senior executives may make some bold investment decisions that increase the company’s operating risks. Therefore, director liability insurance may be a double-edged sword for the governance of listed companies.
Increase in demand
Force insurance companies to improve their underwriting capabilities
From the perspective of insurance companies, with the increasing demand for D&O insurance, it has become a top priority to strengthen the underwriting capability and launch a more “localized” D&O insurance.
Wang Min said that the current insurance coverage rate for director and liability insurance is around 15%, and the insurance coverage rate will rise rapidly in the future. “Some insurance brokerage practitioners predict that the penetration rate of D&O insurance may reach 40% in the next three years. With the increase in the insurance rate, it can be expected that the annual premium of D&O insurance can reach several billion yuan in the future.”
“As more and more A-share listed companies purchase Dong Liability insurance, insurers face both opportunities and challenges. Insurance claims disputes related to Dong Liability insurance and professional liability insurance are expected to increase with the increase in the insurance rate and the number of cases. More and more. Because there are many versions of the policy wording of directors’ liability insurance and professional liability insurance in the market, there are big differences between insurers, and policyholders and their brokers need to compare carefully to formulate the best for the insured. Solution. In addition, insurance companies do a good job in the product design and underwriting stages, which can effectively reduce the probability of claims disputes.” Wang Min said.
He further stated that the current general directors and liability insurance clauses in the market are mainly borrowed from the European and American markets, so the policy structure and clause wording are more in line with the legal environment of the European and American markets. For domestic A-share listed companies, it is very difficult to understand the complicated director and liability insurance clauses, and it is also difficult for insurers and insurance brokers to explain, mainly because the domestic legal system is different from the European and American markets. Therefore, in the future, insurance companies need to design director and liability insurance that meets the needs of China’s local market in accordance with the domestic legal system.
In fact, the reporter checked the supervisory penalty letter and found that an insurance company’s director-liability insurance product had received a supervisory penalty letter for reasons such as “the text of the product terms is obscure, the meaning is unclear, and the rate determination is unscientific.” It is still worthy of research by insurance companies to make complicated D&O insurance easier to understand and accept by listed companies.
Finally, Wang Min suggested that the supervisory authority can legally stipulate information related to directors’ liability insurance as information that must be disclosed by listed companies. The reason is that the information such as the compensation limit, deductible and insurance premiums in the director’s liability insurance policy is related to the financial status and governance structure characteristics of the listed company to varying degrees. They are important indicators to reveal the management and governance level of the listed company. Therefore, the establishment of the information disclosure system of directors and liabilities insurance is conducive to better play the positive role of directors and liabilities insurance in improving the corporate governance structure.
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