Threats facing Australian directors and officers are growing amid shareholder activism and a clampdown by financial regulators in foreign jurisdictions, according to Zurich directors’ and officers’ (D&O) liability expert Paul Schiavone.

He told a conference in Sydney last week that Australia is the “most challenging D&O market internationally” due to its high cost of claims and relatively low premiums.

Speaking at a Zurich financial lines forum via satellite from London – the mass grounding of aircraft in Europe as a result of the Iceland volcano eruption precluded him appearing in person – Mr Schiavone said shareholders are also learning to speak up using a rising number of class actions.

“Once-passive shareholders are now realising they have a voice, and lawyers are helping them exercise this new-found strength.”

He says the recent high-profile case of Rio Tinto executive Stern Hu – who is now serving 10 years in a Chinese prison for stealing commercial secrets and receiving bribes – demonstrates the risk of running foul of the law in a foreign country.

D&O cover must consider circumstances where a company executive is detained overseas.

“We are seeing governments becoming more aware of the insurance tax implications regarding international programs,” he said.

“Would a director or officer want to find out that their global D&O policy cannot pay for their defence costs from a government claim in China, Mexico or Brazil after they have already been arrested?

“Directors and officers must be cognisant of the fact that they are at risk from governments beyond their home government, which can cause many issues.”

Mr Schiavone says emerging areas of risk for directors and officers are climate change and pollution.

“There are a number of government resolutions dealing with how companies must deal with disclosure to shareholders on their carbon footprint.

“Companies need to start addressing climate change issues or shareholders and third-party activists will do it for them.”