Impact of Enron on directors and officers insurance

Perceived risk drives the market for directors and officers liability insurance. Even before the Enron crisis, it was becoming much more difficult for financial institutionss to obtain affordable D&O insurance. Enron not only exacerbated existing trends in the marketplace; it was the impetus for a new wave of change.

The following trends are a result, at least in part, of Enron’s collapse:

• Shifts in the risk assessment model;
• Heightened scrutiny of internal controls;
• An increased focus on independence;
• Active involvement by outside directors and corporate counsel in the insurance process;
• The increased costs of obtaining insurance.

Source: National Union Fire Insurance Company of Pittsburgh