Our reporter Su Xianggao

  On February 18, Genesis issued an announcement saying that the company plans to purchase director liability insurance with a premium of 250,000 yuan.

According to the reporter's incomplete statistics, as of February 20 this year, 32 A-share companies have issued plans to purchase directors' liability insurance, a rapid increase from 9 companies in the same period last year.

  Since the Kangmei Pharmaceutical case last year, the enthusiasm for insurance of directors and liability insurance of A-share listed companies has been rising.

However, with the substantial increase in performance risks such as the litigation risk of directors, supervisors, and senior managers, the rate level that reflects the price of director liability insurance has been rising, that is, director liability insurance has become more and more expensive.

  Wang Min, who has 17 years of experience in liability insurance and is now a senior consultant at Shanghai Jianwei Law Firm, told the "Securities Daily" reporter that the simple average rate of A-share directors' liability insurance has been on the rise since 2017. Two thousandths in the third quarter rose to about seven thousandths in the fourth quarter of 2021, and the rate of director liability insurance will continue to rise in the future, which is closely related to the rising exposure to litigation risks faced by A-share listed companies.

  A-share company insurance rate

  There is still huge room for growth

  Director liability insurance began to be concerned by A-share listed companies, due to several events and the implementation of the new securities law.

In 2020, Ruixing Caffeine announced that it had purchased director liability insurance after financial fraud, bringing director liability insurance into the public eye; at the end of 2021, after the results of the first-instance judgment of Kangmei Pharmaceutical, its five independent directors will have to bear high compensation due to joint liability The amount of money has caused concerns about the independent directors of many listed companies, and all listed companies have begun to pay attention to director liability insurance.

  In addition, under the new securities law, the risk of directors, supervisors and senior executives performing their duties has increased significantly, which has accelerated the attention of listed companies to director liability insurance.

Wang Min told reporters that under the new securities law, the risks of directors, supervisors and senior executives in the performance of their duties are concentrated in three aspects: first, regulatory risk; second, enterprise internal risk; third, enterprise related party risk.

In short, the new securities law has greatly increased the litigation risk of listed companies and directors, supervisors and senior managers. In the face of many risks, directors' liability insurance has become one of the important outlets for transferring risks.

  Judging from the data, since last year, especially after the implementation of the new securities law, listed companies' director liability insurance purchase plans have increased significantly. In 2021, a total of 248 A-share listed companies have released director liability insurance purchase plans, compared with 113 in 2020. doubled.

The structure of listed companies that purchase director and liability insurance has also changed. Wang Min said that among the listed companies that plan to purchase director and liability insurance in 2021, private enterprises account for the majority, accounting for 72%. The situation of the main force has changed significantly, "this is mainly because private enterprises and their directors, supervisors and senior managers have begun to pay more and more attention to the important value and governance role of directors' liability insurance after the legal liability risks they face have risen significantly."

  In 2022, listed companies continue their enthusiasm for insuring directors' liability insurance. According to incomplete statistics from reporters, the number of listed companies that plan to purchase directors' liability insurance this year has grown rapidly.

  However, there are still a large number of listed companies that have not taken out director liability insurance, and there is huge room for growth in this type of insurance.

"It is conservatively estimated that the current A-share listed company's director and liability insurance coverage rate should be close to 20%. Compared with the over 80% coverage rate in European and American capital markets, the A-share director and liability insurance market still has a lot of room for development." Wang Min said.

  From the perspective of the insured amount, the data from the official Weibo article of Dajia Insurance Group shows that the average insured amount of foreign listed companies is between 10 million and 50 million U.S. dollars, while the insured amount of my country's Shanghai and Shenzhen A-share companies, Hong Kong-listed companies, and unlisted large companies usually At 50 million to 200 million yuan, the level of protection is relatively low.

At the same time, in 2020, 85% of listed companies in Europe and the United States are equipped with director liability insurance, while the insurance rate in my country is relatively low.

  From the perspective of premium space, according to the calculation of the non-bank team of Everbright Securities, if my country's director liability insurance can reach the coverage rate of 85% in 2030, the total income of director liability insurance premiums from 2021 to 2030 will be 7.62 billion yuan.

  Judging from the current resistance to insurance of directors and liability insurance, the industry believes that there are the following points: First, there are many misunderstandings of directors and liability insurance in listed companies and directors, supervisors and senior managers. There are many foreign compensation cases for liability insurance, but very few domestic ones. Listed companies believe that the probability of compensation is low, which is of little help to listed companies. Third, listed companies are worried that it will be difficult to obtain approval from shareholders' meetings or core management personnel.

  In fact, this year, the directors and liability insurance plans of listed companies have "aborted".

Mideaco, a company listed on the Beijing Stock Exchange, previously announced that the company intends to purchase director liability insurance for directors, supervisors and senior executives.

However, in January this year, the company issued another announcement saying that the proposal to purchase director liability insurance was rejected by minority shareholders.

  Insurance companies can use director liability insurance

  Restricting the risky behavior of listed companies

  In fact, among the many functions of director liability insurance, the function of transferring risk is not only the main function of the insurance, but also more attention by listed companies, while the role of restricting the risks of listed companies is not understood by listed companies. One of the many misunderstandings of directors and liability insurance.

  Specifically, insurance companies can set up supervision clauses to increase management's cost of non-compliance and constrain their risky behaviors.

Take Ping An Property & Casualty's "Directors, Supervisors and Senior Managers Liability Insurance Clause" as an example. This clause stipulates that the insured company shall fulfill the obligation of truthful disclosure, and shall promptly notify the insurer when the risk increases. Increase insurance premiums or terminate contracts.

Among them, Articles 28 to 32 stipulate that after the insured company undergoes major changes such as mergers and acquisitions, reorganization, business closure, shareholder changes, securities issuance transactions, etc., the insured company is obliged to notify the insured company in writing within 30 days after meeting the prescribed conditions. insurer.

  The non-bank team of Everbright Securities believes that, on the one hand, insurance companies can reduce information asymmetry by requiring the insured company to fulfill the obligation of truthful disclosure, and identify whether the insured company has violation risks from the disclosed information; on the other hand, insurance companies can A reward and punishment mechanism is set up. If the insured company has the possibility of increased risk, the insurance company has the right to increase the premium or directly terminate the contract, so as to increase the financial cost of the company's violations and curb its risky behavior.

  The relevant person in charge of Changan Liability also told reporters that director liability insurance plays an active role in hedging the management risks of listed companies and the practice risks of directors, supervisors and senior executives.

On the one hand, listed companies can improve and establish the occupational risk defense mechanism for senior executives of listed companies by insuring directors' liability insurance, improve the governance level and anti-risk ability of listed companies, and protect the interests of shareholders; on the other hand, the purpose of insuring directors' liability insurance is to compensate. For the losses caused by unintentional acts of directors, supervisors and senior officers, including civil compensation, settlement money, legal defense costs, and investigation costs, Dong Zexian also played an important role in motivating directors, supervisors and senior executives to serve.

  Increased risk exposure

  Director's liability insurance rates may continue to increase

  Price is an important decision-making indicator for listed companies to insure directors' liability insurance. However, judging from the trend, the price of directors' liability insurance may continue to rise in the future.

  The indicator that reflects the price of director liability insurance is the rate, that is, the proportion of the insurance premium charged by the insurer to the policyholder or the insured according to the insurance amount.

Wang Min said that the pricing factors of directors and liability insurance are complex, and it is necessary to comprehensively consider various factors such as the industry, market performance, litigation risk, corporate governance, financial status, public opinion, and personal circumstances of directors, supervisors and executives of the insurance company. The rate level may be quite different from the market average rate.

  Although different insurance companies may have different quotations for the same listed company, from a long-term perspective, since 2017, the industry rate of directors and liability insurance has continued to rise.

Wang Min believes that with the full implementation of the registration system, the overall risk exposure of A-share listed companies will increase significantly. Listed companies of liability insurance need to pay attention to this development trend and make timely decisions.

For example, Guangdong Media issued an announcement on the purchase of directors' liability insurance last year, with a rate of 2.5%. Since then, the rate of special service, ST Hengkang, and Huali Group has all reached 2%, although the current cases reaching this rate are still relatively low. However, this shows that some listed companies have begun to pay more attention to director liability insurance, and are willing to transfer later litigation liability risks at higher rates.

  Wang Wei, Assistant General Manager of the Financial Risk Division of Huatai Insurance Brokerage, believes that before the judgment of the Kangmei Pharmaceutical Incident, the policyholders of the director's liability insurance are more inclined to purchase the liability limit of 30 million to 80 million yuan, and the corresponding premium cost is 300,000 yuan. Yuan to 800,000 yuan.

However, after Kangmei Pharmaceutical and related responsible persons were sentenced to high compensation, the insured's demand for the liability limit of directors' liability insurance increased significantly, and the premiums also showed a further upward trend.

(Securities Daily)