Directors & Officers (D&O) insurance

A straightforward guide for UK directors in 2025

Directors and Officers insurance protects the personal liabilities of company directors, officers, and sometimes senior managers when they are accused of wrongful acts in the course of their duties. Claims can arise from shareholders, employees, regulators, creditors, or other third parties. The policy is designed to fund defence costs, settlements, and certain civil fines where insurable by law, helping to safeguard personal assets and balance sheet stability.

In 2025, the UK D&O market is relatively soft, with many firms seeing rate reductions as insurers compete for business. A material share of policyholders have renewed at lower or flat premiums, and some have secured broader terms or higher limits without significant additional cost. For responsible boards, this creates an opportunity to strengthen protection while maintaining budget discipline.

This soft pricing does not mean risks have diminished. UK and European class actions have grown in recent years and regulatory scrutiny is intensifying. New laws, including reforms targeting economic crime and corporate transparency, have sharpened accountability for directors. ESG disclosures and sustainability reporting standards are expanding, raising the risk of allegations such as greenwashing or disclosure failures. Health and safety enforcement remains robust with high conviction rates, and cyber governance has become a board-level exposure.

Insurance can offer real protection, but only when you understand what is covered and where the gaps may sit. This guide explains how D&O works, what to look out for, and practical steps to buy cover that aligns with your organisation’s risk profile. No jargon, no pressure - just clear, balanced information to support confident decisions.

What is covered in practice

A standard D&O policy typically includes three parts. Side A protects individual directors when the company cannot indemnify them, such as during insolvency. Side B reimburses the company when it indemnifies directors. Side C, often called entity securities cover, protects the company itself for certain securities-related claims, more common in publicly listed contexts.

Policies cover defence costs, investigations, regulatory proceedings, and civil damages where insurable by law. Common allegations include breach of duty, misrepresentation, failures in oversight, employment practices issues at board level, and reporting or disclosure errors. For example, a whistleblowing complaint about inaccurate sustainability data may trigger an investigation and legal costs. A cyber incident that exposes customer data could lead to regulatory inquiry and shareholder claims alleging inadequate oversight.

Exclusions vary. Typical carve-outs include dishonest or fraudulent conduct proven by final adjudication, bodily injury and property damage claims better addressed under other policies, and prior-known circumstances. Many policies include conduct severability so one individual’s proven fraud does not void protection for innocent directors. Some civil penalties are uninsurable under UK law. Always check territorial limits, insured persons definitions, and how excesses apply to different insuring clauses.

Claims generally start with early notification to the insurer, followed by appointment of panel or approved legal counsel. Defence funding is usually on an advancement basis subject to reservation of rights, so bills are paid as the case progresses rather than reimbursed at the end. Clear, prompt notification is vital to avoid disputes over late reporting.

Who benefits most

D&O insurance is relevant to most UK organisations with a board, including private companies, AIM and Main Market listed entities, charities, housing associations, and not-for-profits. It is particularly valuable for firms with external investors, lenders, or complex regulatory exposure, and for sectors facing heightened scrutiny such as financial services, technology, healthcare, and infrastructure.

Directors of distressed companies are especially exposed. If a company cannot indemnify due to insolvency, Side A becomes the safety net that protects personal assets from legal costs and damages. Early-stage and growth companies also benefit because governance decisions around fundraising, disclosures, and hiring can lead to allegations if growth stalls.

It may be less critical for micro-businesses with very simple structures, no external shareholders, and minimal regulatory touchpoints. Even so, affordability in today’s soft market means a modest limit can still be sensible risk management for many smaller firms.

Choosing your level of protection

1. Essential - Side A only

   • Focus: Personal asset protection for directors when the company cannot indemnify, including insolvency scenarios.
   • Suits: Lean budgets, early-stage or distressed companies, or organisations seeking a personal protection backstop.

2. Core - Side A and Side B

   • Focus: Personal protection plus company reimbursement when it indemnifies directors.
   • Suits: Most private companies seeking balanced protection across individual and corporate exposures.

3. Comprehensive - Side A, B and C

   • Focus: Full suite including entity securities claims where available.
   • Suits: Publicly listed or listing-aspirant companies, or larger private firms with investor-led scrutiny.

4. Side A Difference-in-Conditions (DIC) add-on

   • Enhances individual protection with broader wording, fewer exclusions, and drop-down capability if underlying insurance is unavailable or rescinded.

5. Emerging risk extensions

   • ESG and climate disclosure wording updates, cyber governance claims clarity, and AI oversight allegations. Many UK buyers are securing broader terms and higher limits as insurers compete.

6. Claims and investigation enhancements

   • Pre-claim inquiry costs, dawn raid and extradition support, and updated conduct severability language.

7. Long Term Agreements for stability

   • Particularly used by financial institutions to lock in terms and pricing for multiple years, aiding budgeting through uncertain litigation cycles.

What it might cost and why

Pricing varies by insurer and risk profile. The UK’s 2025 soft market provides an opportunity to obtain broader cover at more favourable terms, but individual circumstances still drive final premiums.

Can you apply - and what you will need

Most UK companies with an active board can apply. Insurers typically request recent financial statements, details of shareholding, litigation history, governance frameworks, and information on cyber controls, ESG reporting processes, and health and safety oversight. Larger limits may require supplementary questionnaires for employment practices, cyber governance, and sustainability disclosures.

Common reasons for decline include undisclosed investigations, unstable financials without a credible plan, significant pending claims, or refusal to adopt basic risk controls. Firms engaging with new obligations under UK economic crime reforms and sustainability reporting will be asked to evidence policies, training, and board oversight. Accurate, complete declarations protect you at claims time.

Buying and using D&O cover - step by step

1. Define your risk profile and target limits using realistic scenarios.
2. Gather documents - accounts, governance policies, claims and incident history.
3. Request quotes from multiple insurers via a broker for market comparison.
4. Compare wordings - Side A strength, exclusions, investigations, severability.
5. Adjust retention and limits to balance budget and risk appetite.
6. Bind the policy and diarise notification and reporting requirements clearly.
7. Train directors on what to notify and how to escalate issues quickly.
8. If a claim arises, notify immediately and follow panel counsel guidance.

The upsides and the watch-outs

Key details to confirm before you proceed

Review the schedule, policy wording, and endorsements together. Check who counts as an insured person, territorial limits, and how excesses apply across Side B and Side C. Confirm conduct exclusions, severability provisions, and whether defence costs erode the limit. Examine investigation coverage, pre-claim inquiry costs, and dawn raid support. Look carefully at ESG, cyber governance, AI oversight, and health and safety language to identify any gaps. Validate retroactive dates, prior-known circumstance exclusions, and claims-made reporting requirements. Ask your broker to map how the policy will respond to realistic scenarios for your board.

Alternatives that may fit better

1. Professional indemnity insurance - Covers negligent professional services, not board decisions. Suitable for service firms alongside D&O.
2. Cyber insurance - Responds to cyber incidents and data breaches. Complements D&O where board oversight is alleged.
3. Employment practices liability - Focuses on employment-related claims. Useful where workforce disputes are frequent.
4. Public liability and product liability - For bodily injury or property damage claims better handled outside D&O.
5. Crime insurance - Addresses employee or third-party fraud losses, aligning with economic crime risk controls.

Common questions - clear answers

Q: Does D&O cover fines and penalties? A: It may cover certain civil penalties where insurable by law, but many fines are uninsurable in the UK. Defence costs are often covered even where penalties are not. Always check the wording.

Q: Why is Side A so important? A: Side A protects individual directors when the company cannot indemnify them, for example during insolvency. It pays defence costs and covered losses directly to individuals without a retention in many policies.

Q: Are D&O rates falling in the UK? A: Yes, the UK market in early 2025 is generally soft with declines around 5-10% for many buyers. Competition and capacity have improved terms and availability, though outcomes vary by risk profile.

Q: Does D&O cover cyber incidents? A: It does not replace a cyber policy. D&O can respond to governance-related claims arising from a cyber event, such as shareholder allegations of oversight failure, subject to policy terms and exclusions.

Q: What new risks should boards consider? A: Rising class actions, stricter economic crime rules, expanded sustainability reporting, health and safety enforcement, and allegations around AI or greenwashing. Ensure your wording addresses these evolving exposures.

What to do next

Take stock of your board’s exposures and current wording. Shortlist desired limits, retentions, and key extensions, then obtain comparable quotes. Ask for clarity on Side A strength, investigation cover, and emerging risk language. Move at your own pace - your goal is clear, reliable protection that fits your budget and risk tolerance.

Important note

This guide provides general information, not personal financial advice. D&O terms vary by insurer and policy. Always read the full wording, endorsements, and schedule, and seek professional guidance before making a purchase decision.