Australian insurers are reassessing directors’ and officers’ risk rating criteria to remain competitive as global carriers open offices here and new London market capacity softens market conditions.

The local D&O market has “experienced a positive shift” this year, says Theresa Lewin, broker Gallagher’s practice leader for professional and financial risks in Australia.

This creates more opportunities for well-managed businesses to protect their boards and senior managers.

Businesses that previously removed or reduced side C cover – protection from the cost of legal claims against the company – can now reconsider and take advantage of insurers' preparedness to amend limits, sublimits, unfavourable terms or retention levels, Ms Lewin says.

Underwriters are reassessing premiums and risks, and showing greater interest in lower layers of insurance programs with higher premiums – challenging cost structures previously determined by increased limit factors set by insurers.

Ms Lewin says climate-related financial disclosures and transparency on the use of artificial intelligence are risks that should be managed carefully by directors and managers.

Geopolitical issues and their impacts on supply chains and customers also present significant risks, while workplace health and safety actions brought by employees against directors have also risen.

Gallagher advises businesses to review indemnity limits to account for this type of claim inflation.

“While we are currently experiencing a decline in new class action filings, shareholder claims persist, particularly in security class actions,” Ms Lewin said.

“These cases are expanding to include issues like cybersecurity risk disclosure, with a recent emphasis on plaintiffs needing to establish proof of liability.”

Regulators are placing more focus on individual accountability, she says, noting that a $575,000 penalty against a former BlueScope GM cannot be recovered from an insurance company by Federal Court order.

“Identifying risks and prioritising compliance and risk management solutions are crucial steps in reducing personal liability for directors,” Ms Lewin said.

“Businesses should be prepared to differentiate themselves to potential insurers while demonstrating awareness of corporate accountability, particularly in respect to the changing regulatory landscape, governance in key risk areas and stakeholder engagement including shareholders, employees, customers, their supply chains and the community.”

Gallagher says many boards are establishing or strengthening dedicated committees, subcommittees and focus groups for key risks such as cyber, due diligence around the use of AI, money laundering and sustainability.