Management liability insurance

A steady guide to protecting leadership decisions

Management liability insurance (MLI) helps protect a company and its leaders when decisions are challenged. It typically bundles directors and officers (D&O), employment practices liability (EPL), and corporate legal liability into one policy. In plain terms, it is designed to fund defence costs and settlements arising from allegations that directors or the company mishandled duties, treated staff unfairly, or failed to meet regulations.

In 2025, UK premiums are generally competitive, reflecting a market with ample insurer capacity and price softening of around 5 to 20 percent. That makes it a sensible moment to review cover. At the same time, claim drivers are evolving. Insolvencies remain elevated, which historically correlates with more D&O claims. Employment claims are expected to rise as organisations restructure. Cyber oversight is under a brighter spotlight, with board-level accountability increasing. AI and ESG oversight are also moving from emerging issues to live board responsibilities. The result is straightforward: pricing may be favourable now, but risk is widening and defence costs continue to climb.

If you are wondering whether this is essential or optional, think about how decisions are made across your business. Even well-run firms can face allegations from employees, shareholders, regulators, or creditors. MLI cannot prevent a claim, but it can help pay for legal experts, manage reputational exposure, and protect personal assets of directors where eligible.

Insurance can offer real financial protection, but only when you understand what is covered - and where the gaps are.

This guide explains how MLI works in the UK, what it usually covers, where limitations apply, and how to decide on suitable limits and options without overspending.

What it covers and how claims generally work

An MLI policy typically includes three pillars. D&O responds to claims against individual directors and officers for alleged wrongful acts in their management role, such as misstatements, breach of duty, or oversight failures. Corporate legal liability provides protection for the company itself for certain management-related claims. EPL responds to allegations such as wrongful dismissal, discrimination, harassment, or whistleblowing detriment. Many policies also include investigation costs for regulatory inquiries and some crisis PR support.

There are common exclusions. Fraud, dishonesty, and deliberate illegal acts are usually excluded, especially after a final adjudication. Known prior circumstances and pending litigation are typically not covered. Contractual liabilities beyond normal legal duties often fall outside scope. Some claims relating to pollution or bodily injury are excluded unless specifically carved back. A cyber incident is not the same as a D&O claim, but allegations of inadequate cyber governance can trigger D&O cover. Always check sub-limits, defence cost allocation, and any insolvency-related restrictions.

Here is how a claim might run. An employee alleges wrongful dismissal and brings a claim. The EPL section can fund legal defence and, where permitted, settlement or awards. In another scenario, a creditor brings an action against directors following insolvency. The D&O section may respond to defence costs, subject to exclusions and limits. Insurers usually appoint or approve specialist panel firms, manage costs, and require prompt notification. If an investigation escalates into proceedings, costs continue within policy limits.

Who benefits most - and who may not

MLI is particularly useful for UK SMEs and mid-market firms where underinsurance is common. Many smaller businesses operate without any cover or with gaps, leaving directors personally exposed during disputes. Firms with external investors, active boards, complex supply chains, or regulated operations benefit from the reassurance of funded defence. Fast-growing sectors such as fintech face heightened regulatory scrutiny and cross-border exposure, making tailored MLI especially relevant.

It may be less critical for micro businesses with no employees, no external finance, and minimal regulatory exposure, though basic D&O can still be prudent where there is a formal director structure. Companies with strong in-house legal teams and robust governance will still value MLI for the balance sheet and personal asset protection it can provide. The key is fit-for-purpose cover, not simply the existence of a policy.

Choosing your cover level and options

1. Essential tier - core protection for smaller firms

   • Includes D&O with modest limits, corporate legal liability for defined management claims, and basic EPL.
   • Suits micro and early-stage SMEs needing entry-level protection at a manageable price.

2. Standard tier - balanced cover for growing businesses

   • Higher limits, broader investigation costs, and extended entity cover.
   • Often includes advancement of defence costs, crisis communications support, and some outside directorship cover.

3. Comprehensive tier - enhanced protection for complex risks

   • Top-end limits, broader worldwide territory and jurisdiction clauses, and improved severability provisions.
   • May include public relations sub-limits, improved allocation, and extended discovery periods.

4. Optional add-ons to consider

   • Employment practices enhancements - third-party discrimination, wage and hour sub-limits where available.
   • Cyber governance extensions - cover for shareholder actions alleging oversight failures.
   • ESG and regulatory extensions - improved investigation costs, environmental representation, and UK-specific regulatory coverage.
   • Long-term agreements - multi-year terms that can stabilise pricing and maintain coverage continuity.

5. Claims-made mechanics and run-off

   • MLI is usually claims-made. Consider run-off cover during mergers, sales, or winding-up so past acts remain protected.
   • Assess discovery periods carefully, especially when changing insurers or restructuring.

Prices are softening across the UK market, but limits and wording still matter.

What it costs in the UK - and why it varies

Typical premiums vary by size, sector, governance, and claims history. The UK market is competitive in 2025, with many insurers offering increased sub-limits and long-term agreements. Small businesses might see annual premiums from roughly £4,000 to £40,000, while larger corporates can extend far higher. Use these ranges as orientation only - not guarantees.

Can you apply - and what insurers check

Most UK-registered limited companies, LLPs, and charities with a board structure can apply. Insurers will request financial statements, details of ownership, group structure, and any pending or prior claims. They often ask about governance frameworks, board minutes, employment practices, cyber risk oversight, and ESG policies. High-growth or regulated sectors may face deeper questions on compliance and reporting.

Applications can be declined where there is undisclosed or ongoing litigation, evidence of fraud or dishonesty, severe financial distress, or a lack of basic governance controls. Firms undergoing restructuring or at heightened insolvency risk can still obtain cover, but may see restricted terms, higher retentions, or lower limits. Clear, consistent disclosures help underwriters price fairly and reduce delays.

From quote to claim - a simple pathway

1. Gather financials, governance policies, and any prior claims information.
2. Request quotes with your target limits, territories, and key extensions.
3. Compare wording differences - exclusions, sub-limits, defence cost allocation.
4. Select a cover level and confirm excesses, retentions, and endorsements.
5. Bind cover and diarise renewal, notice periods, and any LTA milestones.
6. Train leaders on notification triggers and document governance processes.
7. Notify insurers promptly of incidents or investigations that may become claims.
8. Work with approved legal counsel and share updates until resolution.

Advantages, drawbacks, and what to weigh up

Read this before you commit

Check the policy schedule for total limits, sub-limits, and whether defence costs are inside or outside the main limit. Understand excesses or retentions for each section, plus any waiting periods or investigation triggers. Review exclusions for dishonesty, prior claims, contractual liability, and jurisdictional carve-outs. Confirm retroactive dates, discovery options, and run-off terms if you are planning a sale or closure. Finally, scrutinise renewal conditions - premiums can change if claim frequency rises or if legal cost inflation continues.

Alternatives and related options

1. Professional indemnity insurance - Focused on alleged negligence in professional services. More suitable where client advisory risk is dominant.
2. Cyber insurance - Responds to data breaches and business interruption. Vital alongside MLI if digital risk is material.
3. Commercial legal expenses - Lower-cost legal support for defined disputes. Useful for smaller firms with limited budgets.
4. Crime insurance - Covers theft and fraud by employees or third parties. Complements MLI’s fraud exclusion.
5. Public and product liability - Covers injury or property damage to third parties. Separate from management decisions risk.

FAQs

Q: Is management liability the same as D&O? A: D&O is a core component focused on individuals. Management liability usually bundles D&O with corporate legal liability and employment practices cover, offering broader protection for both leaders and the entity.

Q: Are cyber incidents covered under MLI? A: A cyber breach itself is typically handled by cyber insurance. However, shareholder or regulator allegations of poor cyber governance may trigger the D&O section, subject to policy terms and exclusions.

Q: How much cover should we buy? A: Consider company size, sector, investor profile, and potential defence costs. Insolvency risk, employment exposures, and regulatory activity all influence limits. Many firms review limits annually against inflation.

Q: Why are premiums softer in 2025? A: Increased insurer capacity and competition have helped reduce prices for many buyers. Even so, rising claim frequency and legal cost inflation can offset some savings over time.

Q: Will MLI protect personal assets during insolvency claims? A: It can help fund defence for covered allegations against directors, subject to exclusions. Fraud or dishonesty after final adjudication is typically excluded. Check insolvency-specific wording carefully.

Q: Do SMEs really need this cover? A: UK SMEs face high levels of underinsurance and rising employment and insolvency-related risks. MLI provides access to specialist defence and helps protect leaders where personal exposure exists.

What to do next

If MLI seems relevant, collect your financials and governance documents, then compare quotes and wordings side by side. Focus on limits, sub-limits, and exclusions rather than headline prices alone. Take your time, ask questions, and choose the option that clearly fits your risks and budget.

Important note

This guide is general information, not personal financial advice. Policy features and terms vary by insurer. Always read the schedule and wording carefully and consider professional advice before making a decision.