The effect of D&O insurance on managerial risk taking

Risk taking in business contributes towards innovation while excessive risk taking is associated with corporate failure. This book illustrates how insurance against personal liability of the manager threatens – but also benefits – society and the economy
Max Gaber
Ius Commune Europaeum
book | published | 1st edition
August 2015 | xvi + 252 pp.


ISBN 9781780683485

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Risk taking in business contributes towards innovation. Yet excessive risk taking is associated with corporate failure. Many authors have analysed the relationship between personal liability rules of managers and excessive risk taking. In this context, previous researchers have often argued that insurance against personal liability of the manager (D&O insurance) would weaken the manager’s incentive to take care.

However, little is known about the workings and effects of D&O insurance. This book analyses how D&O insurance should work ideally and how it currently works in the USA, the UK, the Netherlands and Germany.

It illustrates how D&O insurance threatens – but also benefits – society and the economy. In fact, a properly functioning D&O insurance system can more elegantly incentivize adequate risk taking than for example, direct regulation of managerial activity (e.g. disqualification) or the adoption of harsher liability rules.

This book provides an overview of the implications of D&O insurance, in particular to:
- policy makers who can take concrete reform proposals from this book;
- investors who can increase their returns by using the information on corporate D&O insurance policies;
- creditors who can better estimate their debtor’s default risk by understanding the debtor’s D&O insurance policy; and
- finally, prospective insurers who can learn in depth about the D&O market, the policy design and the D&O risk.


Table of Contents (p. 0)

Chapter 1. Introduction (p. 1)

Chapter 2. Managerial liability (p. 5)

Chapter 3. Risk bearing and insurance (p. 27)

Chapter 4. Obstacles to risk bearing and insurance (p. 41)

Chapter 5. D&O insurance (p. 67)

Chapter 6. National managerial liability rules (p. 93)

Chapter 7. Empirical evidence on the effect of D&O insurance (p. 129)

Chapter 8. Qualitative analysis of the D&O insurance (p. 163)

Chapter 9. Obstacles to D&O insurance and recommendations (p. 197)

Chapter 10. Conclusion (p. 215)

Summary (p. 225)

Samenvatting (p. 227)

Zusammenfassung (p. 229)

List of references (p. 231)

Curriculum vitae (p. 249)

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Ius Commune Europaeum

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The ‘Ius Commune Europaeum’ series focuses on the common foundations of the legal systems of the Member States of the European Union. It includes horizontal comparative legal studies as well as studies on the effect of EU law, treaties and international regulation within the national legal systems. All substantive fields of law are covered.

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Editorial Board
Prof. Dr. J. Smits (chair - Tilburg University, the Netherlands)
Prof. Dr. M. Faure (Maastricht University and Erasmus University Rotterdam, the Netherlands)
Prof. Dr. E. Vos (Maastricht University, the Netherlands).

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