AIG innovates in tough times
01 November 2013 | Magazine Archives FAnews & FAnuus | Features / Profiles | Philip Hobson, AIG South Africa
As the world comes to terms with the new economic and political climate that it finds itself in, challenges such as decreased profit margins and cyber security come under the spotlight, and may prove to be major headaches for company managers to come to terms with. It is a difficult time for company directors and officers (D&O), as changes in both local and global legislation, as well as evolving corporate governance demands are having a significant impact on the risks these individuals face.
AIG has responded to these important shifts by introducing Corporate Guard, a product which provides extended protection to directors and officers in today’s tough economic environment.
Continuing trend
"Over the period from 2007 to 2011, AIG has seen a 63% increase in claims notifications in D&O claims, and we expect the number of claims in this area to continue to increase,” says Philip Hobson, Profit Centre Manager Financial Lines of AIG South Africa. "The largest number of claims in South Africa has come via insolvencies, and Corporate Guard will help in this regard with added cover for insolvency hearings, offering legal assistance prior to a claim. This extended cover will lead the market and ensure that directors who are required to assist any insolvency administrator, receiver or liquidator with their enquiries into the company, are professionally prepared and represented.”
Against this backdrop of rising claims against D&O’s, AIG will provide a market first: any one claim reinstatement cover for certain sectors and jurisdictions. This means that a policy will not be limited to one annual limit, but extra cover will be available to respond with a fresh limit for every claim no matter how many claims a commercial client has on their policy.
A new additional capacity of up to $100 million in South Africa will also allow AIG to provide indemnity in a cleaner and more streamlined way for placement of business for clients. This will ensure that directors and officers will benefit from AIG’s strengths globally, while taking advantage of local expertise.
Widening the cover
AIG also offers improved cover for mitigation and prosecution costs, which will enable the insured party to take more proactive means to head off potential claims. Corporate Guard has specific provisions to take the initiative to minimise risk in potentially damaging situations.
The new Corporate Guard policy will allow AIG to roll out this solution through AIG Multinational Programs to ensure continuity of cover across borders.
"As companies expand into Africa and beyond, D&Os become exposed to new liabilities and unfamiliar corporate governance regimes. The new Corporate Guard provides directors and officers peace of mind by providing emergency funding to directors in case their property is confiscated, or assets frozen covering personal expenses such as schooling costs, housing mortgage payments or personal insurance premiums. It also provides cover where unpaid corporate taxes generate individual liability,” says Hobson.
A definite industry need
There can be little doubt as to the trend of increasing regulatory activity in emerging markets, which is expanding in correlation to the economic growth of these countries.
"There are more dedicated laws and regulations, dedicated regulatory bodies and dedicated resources. This is a result of globalisation, which has seen many nations upgrading their legal systems in order to attract investment through increased accountability. This, in turn, has meant making directors and company officers more liable on a personal level for claims,” adds Hobson.
Increased protection needed
"It is clear that no director is immune to litigation, particularly in light of the growing litigiousness of clients, business partners and industry rivals. There is an increasing number of entities prepared to instigate claims with sufficient access to funding to do so, which means the responsibility and accountability of directors and company officers will only continue to increase in future. It is obvious then that more than ever, such individuals need greater protection going forward as provided by this type of insurance,” he concludes.
