Directors and officers make consequential decisions under real personal exposure. Under the Companies Act, SEBI regulations, tax and employment law and more, they can be held personally liable — with their own assets at risk — for alleged wrongful acts in running the business. D&O insurance is what stands between that exposure and their personal wealth.
01. What D&O insurance is
Directors' & Officers' liability insurance protects individual directors, officers and key managerial personnel against claims alleging a "wrongful act" committed in their managerial capacity — and reimburses the company where it indemnifies them. It pays defence costs, settlements and damages, so that leaders can make decisions without their homes and savings on the line.
02. Why it matters now
- Personal assets are exposed — liability attaches to the individual, not only the company.
- Expanding liability — obligations under the Companies Act, 2013, SEBI rules, tax, environmental and employment law keep widening.
- Many potential claimants — shareholders, investors, regulators, creditors, employees, customers and competitors.
- Investors and boards expect it — PE/VC investors routinely require D&O cover, and it is effectively mandatory around an IPO.
03. How the cover is built — the insuring clauses
Side A
Protects individuals directly when the company cannot indemnify them — for example, in insolvency or where indemnification is prohibited.
Side B
Reimburses the company when it indemnifies its directors and officers.
Side C (entity cover)
Covers the company itself for securities claims — especially relevant for listed companies.
04. What it covers
- Defence costs — often the largest early expense, covered as incurred.
- Settlements and damages for covered claims.
- Legal representation for investigations and regulatory inquiries.
- Wrongful acts — alleged breach of duty, mismanagement, misstatements, and regulatory breaches.
- Related costs — such as extradition, public-relations/crisis and emergency defence costs, depending on wording.
05. Common extensions
| Investigation costs | Cover for costs of responding to regulatory investigations. |
| Employment practices | Claims alleging wrongful dismissal, harassment or discrimination (where added). |
| Outside directorship | Cover for individuals serving on outside boards at the company's request. |
| Retired directors / run-off | Extended cover for those who have left, and run-off on M&A or wind-down. |
| New subsidiaries | Automatic cover for newly acquired or created subsidiaries within limits. |
| Spousal & estate cover | Protection extending to spouses, heirs and estates of insured persons. |
06. Who needs it
Any organisation with a board carries this exposure — private companies, PE/VC-backed businesses, and start-ups (where investors demand it), companies planning an IPO, listed companies, and even not-for-profits and trusts whose trustees bear personal responsibility. The larger the business, the wider the regulatory surface, and the more essential the cover.
07. What it does not cover
Typical Exclusions
- •Proven fraud, dishonesty or personal profit to which the insured was not legally entitled (usually once finally established);
- •Prior and known claims or circumstances notified before inception;
- •Bodily injury and property damage (save for defence costs / specific carve-backs);
- •Fines and penalties where these are uninsurable by law;
- •Claims by one insured against another, subject to important carve-backs.
08. Limits, and the claims-made basis
The right limit of indemnity depends on turnover, balance-sheet size, sector, listing status, litigation profile and overseas exposure — US-linked activity, in particular, raises the bar. D&O is written on a claims-made basis, which makes continuity of cover, the retroactive date, and prompt notification of circumstances critically important. On a sale or restructuring, run-off cover protects past leadership for acts committed before the deal.
09. How Aurevian helps
D&O is a wording-driven cover where the carve-backs matter as much as the headline limit. Aurevian helps you size the limit to your real exposure, negotiate wording and extensions, manage the claims-made mechanics and retroactive cover, and arrange run-off around transactions — so the protection holds precisely when a claim lands.
“Good governance invites scrutiny. D&O cover is what lets your leaders withstand it.”
