Increased regulatory focus on the practice of executives backdating their stock options could have a major impact on the D&O market, according to Aon.
The US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) are investigating at least 54 companies who have allegedly allowed their executives to backdate their stock option grants to benefit from the advantageous movement in share price.
Aon has predicted that while the ongoing litigation is currently US based it is likely that the UK and Europe, where backdating is not allowed, will feel the ripple effect.
Adam Codrington, executive director within Aon's professional risks unit, said: “At the moment there have been no insurer pay outs from a D&O perspective. However underwriters are paying a great deal of interest to this issue. As the scandal unfolds, we are likely to see much more focus on the cost of D&O insurance and a possible restriction of terms and conditions.”
