Allianz Global Corporate & Specialty (AGCS) is reporting the COVID-19 pandemic has created an unstable business environment for directors and officers (D&O) of companies which brings with it new and increased risks for 2021.

Some of the risks many company directors and officers may be held liable for are increased cybersecurity risks, insolvency exposure, and continuous securities class-action activity. AGCS also feels that companies also need to protect themselves against litigation that would invite media attention such as poor sustainability performance, inaction on diversity, or miscalculate or misinterpret COVID-19 risks.

AGCS also shared some of their top concerns for the D&O insurance industry in 2021. One area of worry they listed was forthcoming insolvency warnings. According to credit insurance company Euler Hermes, many of them are predicted to occur within the first half of the year.

A second risk AGCS is looking out for is on the evolving cybersecurity threat. This is due to ransomware attacks and data breaches on that are on rise.

The COVID-19-related shift to remote work has also increased security vulnerabilities. This is due to employees using their personal computers to access company files from home, resulting cybersecurity gaps and vulnerabilities reported by employees.

AGCS detailed more risks directors and officers may encounter this year. An important one is class-action activity. Many of these lawsuits are directly related to COVID-19. Examples include lawsuits against cruise lines that suffered coronavirus outbreaks, as well as suits regarding the business impact of COVID-19 on companies’ financial performance or operations and misrepresentations about COVID-19-related therapies.

Environmental, social, and governance (ESG) issues also have the ability to spark concerns for directors and officers in 2021. They can cause event-driven litigation that drives negative attention to a company. ESGs can take the form of diversity derivative lawsuits where shareholders claim that directors violated their fiduciary duties by not taking action on diversity issues.

Private companies are also at risk to be exposed to D&O risks. The COVID-19 pandemic is currently exposing private companies and their executives to greater litigation risk, AGCS said.

Joana Moniz, global head of commercial financial lines at AGCS shared her concerns of D&O risks for this group of companies, “Generally, D&Os of privately held companies are more closely involved in all of the company’s operational topics and business decisions,” Moniz said. “This can more easily translate into being held personally liable through different forms of litigation.”

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