Directors and Officers (D&O) Insurance
Investors expect D&O coverage before funding a fintech, asset manager or financial services firm. It protects your board, executives and officers personally when a lawsuit or a regulatory action follows a fundraising round, a governance decision or a company under financial stress. Without it, a claim naming a director or officer personally can become a claim against their personal assets, especially if the company itself can't cover it.
What is D&O insurance?
Directors and Officers insurance covers the personal financial risk that comes with leading a financial services firm, whether as a director, an officer or another executive named in the policy.
If an investor, shareholder, regulator or the company itself alleges you mismanaged the business or breached your duty, D&O is built to respond, covering legal defense costs, settlements and judgments so a lawsuit doesn't become a personal financial event for the people running the firm.
D&O typically works in three parts:
Side A protects individual directors and officers when the company can't or doesn't indemnify them, often because it's insolvent.
Side B reimburses the company when it does indemnify its directors and officers.
Side C protects the company itself against securities claims. Private companies can often get broader entity coverage than public ones.
Who needs D&O insurance?
Any financial services firm with a board, outside investors or regulatory oversight can face a D&O claim, but the risk shows up earliest and most often at these moments:
Investors commonly ask for D&O coverage as a condition of closing, particularly for fintech and asset management firms.
Before a fundraising round.
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Independent and investor-appointed directors often review indemnification and D&O coverage before joining a board.
When you add outside board members.
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Deal-related claims are a frequent source of D&O losses, and coverage needs to be reviewed before closing so pre-deal conduct stays protected.
During an M&A process or exit.
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Rapid growth, new products and regulatory scrutiny all raise governance and oversight risk, especially for fintech, broker-dealers and asset managers.
When the company is scaling fast or handling client funds.
What does D&O insurance cover?
Shareholder derivative actions alleging a breach of fiduciary duty
Governance and oversight failures, including cybersecurity and risk management oversight
Mismanagement of corporate assets or liquidity
Securities law violations and misleading disclosures to investors
Regulatory investigations and enforcement actions involving directors or officers
What isn't covered by D&O insurance?
Fraud or criminal conduct that is knowingly committed (once finally adjudicated as such)
Bodily injury or property damage claims (these fall under General Liability)
Claims the company brings against its own directors or officers, which are often restricted
Claims arising from professional services provided to customers, unless specifically included
Claims arising from conduct before the policy's retroactive date
What are the most common D&O claims?
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Shareholder derivative suits, especially after a down round or a failed fundraise.
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Regulatory investigations and enforcement actions, particularly common for fintech, broker-dealers and asset managers.
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M&A related claims, from both sides of a transaction, including how coverage carries forward after a change in control.
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Investor misrepresentation claims, when financials or projections shared during fundraising later prove inaccurate.
Claims from customers, rather than investors or regulators, often point to a different coverage. If a client alleges they lost money because of investment advice, trade execution or another professional service, that's typically E&O or financial institutions professional liability territory rather than D&O.