Tough action by the Australian Securities and Investments Commission (ASIC) against former James Hardie directors could increase directors’ and officers’ (D&O) liability premiums.

The regulator has urged the NSW Supreme Court to consider banning 10 former executive and non-executive officers of James Hardie and impose fines of up to $200,000 each. With associated legal fees likely to far outweigh those maximum penalties, the worst-case scenario is a concern for James Hardie’s D&O insurers – understood to be a panel of North American companies with branches in Australia.

But Mark Parris, a director of specialist liability broker Risk Partners, says the action may yet affect corporate Australia generally. The action shows a new willingness for ASIC to go after even non-executive directors of businesses – something companies may not have considered when taking out D&O cover.

It also comes at a crucial time in the premium cycle.

“Right now you have a booming economy, a broadening of cover and a softening of policy premiums,” Mr Parris said. “But when the market turns – which it will – insurers will find they haven’t priced for the risks of litigation in the future market.”

He says it could add up to “a very hard landing” for D&O lines, particularly as liability claims can take up to 12 years to resolve.