D&O Insurance Is No Longer Optional - For 1,000 Companies

For the top 1,000 listed entities by market capitalisation, Regulation 25(10) of SEBI's LODR Regulations requires the company to obtain Directors and Officers insurance for its Independent Directors. Since 1 January 2022, this is a mandatory governance requirement for companies within that coverage threshold, not merely a recommended practice.

D&O insurance can address eligible defence costs and liabilities arising from claims connected with a director's role, but it is not comprehensive protection against every allegation. Regulatory investigations, shareholder claims, financial-reporting issues, and securities-law proceedings may all raise coverage questions under the policy wording.

Boards should review cover annually against the company's actual risk profile rather than automatically renewing the existing policy. The review should assess insured persons, limits, retention, territorial scope, investigation cover, run-off protection, defence-cost advancement, and claims-notification requirements.

Exclusions are often as important as the headline limit. Fraud and wilful-misconduct exclusions are common, but policies differ on prior-knowledge exclusions, regulatory sub-limits, insured-versus-insured claims, and pending-litigation carve-outs. A claim-scenario discussion is more useful than a premium-only renewal exercise.