Changes in the way that companies and authorities interact mean that traditional insurance products for directors and officers may not provide executives with the protection they now require, according to insurance firm Marsh.

As regulators and prosecutors increasingly seek to hold individuals on boards and in senior management personally accountable for “corporate wrongdoing”, there is increased pressure for companies to investigate internal conduct and report any findings to authorities.

Companies that cooperate in this way may be able to enter into agreements that reduce or remove corporate liability for reportable conduct. While this cooperation reduces the company’s liability, individuals may be left exposed to criminal charges and regulatory discipline.

Leslie Kurshan, head of product development for the financial and professional practice at Marsh UK, explained: “The questioning of the legality of the conduct of executives now proceeds differently than it has in the past.

“Increasingly, investigators working for the company gather evidence on the conduct of its employees, directors, and officers in cooperation with regulators and prosecutors, or in anticipation of reporting the conduct to them to head off a more formal enforcement agency inquiry.

“Traditional D&O liability insurance policies provide cover when a legal proceeding is served, or a formal investigation commences, but generally include few scenarios where an individual is investigated by his or her own organisation.

“In the current environment, individuals may need legal assistance before these traditional policies would respond.”