spoke with John Rafferty, EVP at Arch Insurance Group about the recent trends in executive liability during the 2015 RIMS Conference in New Orleans. He said the top three executive risks facing large companies involve the regulatory environment, mergers and acquisitions (M&A) and securities class action litigation.

According to Mr. Rafferty, the regulatory environment has become more active with the SEC because of its new leadership. Enforcement actions are up 12% from last year. The Dodd Frank Bill introduced a ‘Whistle Blower’ program that garnered over 3,600 inquiries last year. Litigation is also a big factor in M&As. Mr. Rafferty said more than 90% of deals over $100 million attract litigation against the company being acquired.

Mr. Rafferty sees shareholder derivative litigation as an emerging risk to executive liability. Once seen as a nuisance, shareholder derivative litigation typically did not carry severity. In the last few years however, Mr. Rafferty said there has been “multiple nine-figure settlements around shareholder derivative litigation…If the corporation isn’t there to indemnify the directors and officers (in 33 states, they aren’t allowed to)…. It’s either the insurance company or the individual directors and officers settling those litigations.

Corporate governance and compliance has changed over the last ten years. Mr. Rafferty said the changes were due to the Sarbanes Oxley Act, the McNulty memo from the Justice Department, and then the Dodd Frank Act, which put heightened scrutiny on corporations and their due diligence.

For more World Risk and Insurance News from the 2015 RIMS Conference in New Orleans, visit the dedicated RIMS 2015 Channel in the On Demand Library.

Load More Related Articles

Check Also

Guy Carpenter & RAA Execs on CAT Losses, Elections, & (Re)Insurance Markets

In this edition of CEO Angles, AAIS CEO Ed Kelly welcomes Guy Carpenter Chairman David Pri…