December 13, 2011

D&O Insurance for Executive Compensation Clawbacks?

In an interesting response to some recent FDIC rules, Mike Melbinger blogged recently that a major insurance broker plans had begun offering “policies that would cover financial firms against both their legal costs in the event that they underwent investigation by the FDIC and any compensation that their executives had to hand back as a result of action by the agency.” I’m not sure that the FDIC, SEC or other regulatory agency would let this fly (nor should they). Anyone else out there hear of any developments in this area? Or have thoughts on the topic? Ping me. I will maintain confidentiality as always…

New Insurance for FCPA Investigation Costs?

As this Willkie Farr memo notes: “the insurance industry has begun to develop insurance products intended to protect companies against the costs of FCPA investigations. These products serve a different purpose from that of existing D&O insurance policies. Some D&O policies do not provide any coverage for FCPA investigation costs. Even if a D&O policy does cover FCPA investigation costs, such D&O coverage is limited to costs incurred by individual company officers and directors and does not cover the company’s costs. The new FCPA insurance products, on the other hand, provide coverage for the company itself. To the extent that there is overlap between a D&O policy and an FCPA policy, the FCPA policy would provide primary coverage in the event of an FCPA investigation, preserving the D&O policy for other suits.”

The memo goes on to describe a new product from Marsh USA that “provides coverage for legal, accounting, auditing, and consulting expenses incurred as a result of an FCPA investigation, but does not cover any fines or penalties that might be imposed. Entities and individuals covered by FCPA Corporate Response include the insured company, all subsidiaries, and all persons employed by or otherwise affiliated with or acting at the direction of the company, including independent contractors and consultants. Significantly, FCPA Corporate Response also provides coverage for costs incurred as a result of investigations conducted by foreign regulators pursuant to foreign laws and regulations, such as the U.K. Bribery Act, to the extent that such laws and regulations are compatible with the anti-bribery provisions of the FCPA.”

Survey: How Prepared Are Companies for a Crisis?

This set of survey results prepared by Pillsbury and Levick Strategic Communications provides interesting insights into how prepared companies think they are for a crisis (here’s the related press release). The findings include:

– Only 60% have a formal crisis response plan
– Only 21% have a reputation management plan for social media
– 64% don’t conduct annual training drills
– The following types of crises were thought to most negatively impact the company: security failure (62%); natural disaster (51%); and blackout (40%)

– Broc Romanek