Directors Insurance FAQs
Answers to the most common questions about D&O and management liability insurance in NZ
General
Directors insurance (also called D&O insurance) protects the personal assets of company directors and officers when they are sued for alleged wrongful acts in their management roles. It covers legal defence costs, settlements, and regulatory investigation costs.
It is not legally required, but it is strongly recommended for all NZ company directors. Many investors, lenders, and major customers now require D&O insurance as a condition of doing business or providing capital.
A standard D&O policy covers: (1) legal defence costs when a director is personally sued, (2) settlements or judgments awarded against a director, (3) regulatory investigation costs including FMA or Commerce Commission inquiries, and (4) reimbursement to the company for indemnifying directors.
D&O policies typically exclude: deliberately fraudulent or criminal acts (once proven by a court), personal profits gained illegally, bodily injury and property damage (covered by other policies), and claims made prior to the policy's retroactive date.
Cost
Premiums vary based on company size, industry, turnover, and claims history. For a typical NZ SME, D&O insurance starts from around $800/year. Management liability packages (D&O + employment practices + statutory liability + crime) typically start from $1,200–$2,000/year.
Key pricing factors include: company revenue and assets, industry sector and risk profile, number of directors and employees, claims history, coverage limits required, and whether optional extensions (EPL, statutory, crime) are included.
Some basic D&O products are available online for smaller companies. However, for most directors the best approach is to work with an experienced broker who can tailor the coverage to your specific situation and negotiate the right terms.
Coverage
D&O insurance covers directors and officers specifically for wrongful management acts. Management liability is a broader package that adds Employment Practices Liability (EPL), Statutory Liability, and Crime/Fidelity cover. Management liability policies are generally better value for companies with employees.
Yes — claims by liquidators, creditors, or shareholders arising from a company's insolvency are a major reason NZ directors purchase D&O insurance. Cover during insolvency scenarios is one of the most important aspects of a good D&O policy.
NEDs should check whether the company's D&O policy adequately protects them, especially if the company becomes insolvent. Personal 'Side A' D&O cover provides protection that is entirely independent of the company's policy and is available regardless of what happens to the company.
Run-off cover (also called 'tail' cover) extends protection after a director leaves a board or after a company closes. Since D&O is claims-made, claims can be made years after the alleged wrongful act — run-off cover ensures you remain protected.
Claims
Notify your insurer or broker immediately when you become aware of a potential claim or circumstance that could give rise to a claim. Early notification is critical on claims-made policies. Your insurer will appoint a specialist defence lawyer and manage the claim on your behalf.
D&O claims can take anywhere from a few months to several years depending on complexity. Regulatory investigations can be particularly lengthy. Your insurer will manage the process and keep you informed throughout.
Our specialist advisers are happy to answer any questions about directors insurance.