Australia’s increased exposure to class action cases and the availability of commercial litigation funders is continuing to apply pressure to the local directors’ and officers’ (D&O) insurance market.

Zurich Australia last week warned brokers and customers that it is “not beyond expectation” that the number of class actions against directors and managers will continue to grow.

National Underwriting Manager Financial Lines Susan Elias told a national D&O briefing that recent regulatory activity suggests an increased focus on continuous disclosure for directors and officers of publicly listed companies.

Zurich’s Chief Claims Officer Financial Lines Mark Gates says data released by litigation funder IMF Australia indicates “a clear upward trend” in class actions.

He told the briefing the maximum claim value for cases under this funder increased by almost $400 million in the 2009/10 financial year.

Outlining a case where an Australian businessman has been sentenced to 10 years’ jail in an overseas prison for sharing commercial secrets, Mr Gates says this emphasises the need for business people to have globally compliant insurance programs.

Ms Elias says although the D&O market has been available in Australia for more than 20 years the demand for cover is continuing to grow.

D&O rates have dropped over the past three years and further reductions are expected this year.

Colin, Biggers & Paisley partner Linda Murphy says new corporate exposures in the area of consumer protection, plus the emergence of an “invigorated” Australia Securities and Investments Commission, are putting pressure on D&O cover.

“We may well see an increase in the erosion of limits for defence costs and in particular for legal representation expenses,” she said.