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A group of Australia’s top CFOs have called for an urgent review of the rules governing class action lawsuits as their increasing prevalence continues to push premiums up for directors and officers insurance.
“Insurance fees will continue to skyrocket as class actions grow and settle out of court,” Andrew Porter, president of the Group of 100 and CFO of listed firm AFIC, told the Australian Financial Review.
“Every listed company in Australia is now seeing a dramatic increase in D&O liability cover,” he continued. “We have been told by our insurers that it is a direct result of class actions, so there is a cost to shareholders as well as on the company’s and directors’ time.”
Porter’s comments come after the Australian Law Reform Commission suggested disclosure laws may need to be relaxed, litigation funders regulated and lawyers’ fees examined to tackle the problem.
Ewen McKay, a management liability expert at XL Catlin, also told the news outlet that the price of D&O insurance had “increased spectacularly” over the past 18- to 24 months.
“A good result would be a 40% increase on last year’s premium, but we have seen some companies pay 400% more than their expiring policy,” he said.
According to McKay, the total value of class-action settlements from 1999 to 2016 had been about $1.6 billion with insurers contributing around $1 billion of that.
