150-Plus Chinese Listed Firms Buy Liability Insurance for Executives, Report Says(Yicai Global) June 19 -- With China implementing a comprehensive registration system and stronger supervision, directors and officers insurance has become a popular choice for listed companies to avoid performance risks, it is reported.
More than 150 publicly traded companies in China said they had taken out D&O insurance this year as of yesterday, according to Securities Daily.
Golden Solar announced on June 16 that it intends to but liability insurance for the third year running for the company’s top personnel, including directors and executives. Last year, 337 firms listed in the Chinese mainland bought it.
“D&O insurance takes directors and managers’ civil liability to the company or a third party (shareholders and creditors) as the subject of insurance, and is applicable to directors and other senior management,” said Zhang Liwen, a lawyer at Jingsh Law Firm.
“Currently, 95 percent of Fortune 500 companies have purchased liability insurance for their directors and officers,” he said.
Under the comprehensive registration system, China’s regulators have put forward higher requirements for the governance and information disclosure of listed firms and increased penalties for violations, while investor awareness of rights protection is also rising, noted Deng Zhidong, director of the China CFO 100 People Forum.
The litigation risk faced by listed companies and their directors, supervisors, and senior executives continues to rise, that is why D&O insurance has become a popular choice, Deng added.
D&O insurance is a relatively new type of cover in China. Of the 5,000-odd listed companies in the country, only a small proportion of them have bought it.
Judging from what the firms have disclosed about their D&O coverage plans this year, the insured parties include all directors, supervisors, and officers, with the liability insurance covering up to CNY750 million (USD105 million) and as little as CNY10 million (USD1.4 million). Premiums range from CNY50,000 (USD7,000) to CNY2 million (USD280,000).
Editor: Peter Thomas
