Directors and Officers Insurance UK 2026: Companies Act 2006, Side A/B/C

Directors and Officers insurance is frequently misunderstood as a policy that protects the company from management decisions. Its primary purpose is narrower and more personal: it protects the individual director or officer from the financial consequences of claims alleging wrongful acts committed in their management capacity - including legal defence costs, which begin accumulating immediately on notification of a claim and can reach six or seven figures before any judgment is made. For UK directors, the Companies Act 2006 creates a statutory duty framework that defines what constitutes a wrongful act, and the practical limitations on companies indemnifying their directors make personal D&O cover essential for anyone sitting on a UK board, whether of a listed company, a private SME, or a not-for-profit organisation.

Director Duties Under the Companies Act 2006

The Companies Act 2006 codifies seven general duties that every director of a UK company owes to the company. These duties are: to act within powers (Section 171); to promote the success of the company (Section 172); to exercise independent judgement (Section 173); to exercise reasonable care, skill and diligence (Section 174); to avoid conflicts of interest (Section 175); not to accept benefits from third parties (Section 176); and to declare interests in proposed transactions (Section 177). Breach of any of these duties can expose a director to personal liability to the company for losses suffered as a result.

Section 174's duty of care requires directors to exercise the care, skill, and diligence that would be exercised by a reasonably diligent person with the general knowledge, skill, and experience that may reasonably be expected of a person carrying out the director's functions, and the actual general knowledge, skill, and experience that the director has. A director with relevant professional qualifications is held to a higher standard than a lay director in their area of expertise. Claims alleging breach of the duty of care are the most common basis for D&O claims in the UK, particularly in insolvency-related litigation where a liquidator seeks to recover losses from directors whose decisions preceded the company's failure.

Sections 232 and 233 of the Companies Act 2006 address the extent to which a company can protect its directors. Section 232 prohibits any provision that exempts a director from liability to the company. Section 233 permits a company to purchase and maintain insurance for a director against liability incurred in connection with negligence, default, breach of duty, or breach of trust in relation to the company - this is the statutory permission for a company to fund a D&O policy on behalf of its directors. The practical effect is that while a company cannot simply excuse a director's liability by contractual provision, it can fund insurance that covers the director's defence costs and any damages awarded.

What UK D&O Policies Cover

D&O policies in the UK market are typically structured around three coverage sections, commonly referred to as Side A, Side B, and Side C.

Side A (direct director cover): covers directors and officers directly when the company cannot or will not indemnify them - most commonly in insolvency (where the company has no funds to advance defence costs) or where indemnification is legally prohibited. Side A coverage is the most critical personal protection element, as it operates when the director is most vulnerable: in a company insolvency, often facing a liquidator's claim, without access to company funds.

Side B (corporate reimbursement): reimburses the company when it has indemnified a director or officer for a covered claim. This protects the company's balance sheet from the cost of funding its own indemnification obligations to directors.

Side C (entity cover): covers the company itself (not just individual directors) for securities claims - claims by shareholders alleging that misleading disclosures in the company's securities filings caused investment losses. Side C is primarily relevant for listed companies; private companies often purchase D&O policies without Side C or with a much lower sub-limit.

D&O Underwriters in the UK Market

AIG is one of the largest D&O underwriters globally and maintains a strong UK market position for both listed and private company D&O. Its policy wording (the AIG PrivateEdge for private companies and the AIG PublicEdge for listed entities) is among the most widely analysed in the UK market. Its claims handling for complex director disputes is well-regarded.

Chubb competes directly with AIG across the D&O market and is particularly active in the financial institutions D&O space, covering directors of banks, asset managers, and insurance companies whose regulatory environment creates additional D&O exposure from FCA and PRA enforcement.

Travelers has a strong presence in the mid-market and SME D&O space in the UK, offering policies through broker distribution with competitive pricing for private companies. Its D&O wording is noted for broad coverage of regulatory investigations, which is a growing exposure area for directors of businesses subject to sector regulators.

Allianz and QBE are significant capacity providers in the UK D&O market, particularly for larger risks and programme placements where multiple insurers share the risk across layers of cover. Both are active in the financial lines space alongside D&O.

D&O Exposure Areas Increasing in the UK

The D&O claims environment in the UK has evolved significantly in recent years. Regulatory investigations - by the FCA, CMA (Competition and Markets Authority), ICO, and sector-specific regulators - are an increasing source of D&O claims, as investigation defence costs can reach seven figures even where no enforcement action ultimately results. D&O policies that include investigation costs cover from the point of a formal request for information (not only from the point at which charges are brought) provide significantly earlier financial protection than policies that trigger only on formal proceedings.

Employment Practice Liability (EPL) claims - typically wrongful termination, discrimination, or harassment claims brought by employees against individual directors or managers - are increasingly bundled with D&O cover in UK management liability packages. Standalone EPL cover is also available. The growth of Employment Tribunal claims following the abolition of tribunal fees in 2017 has made EPL a material exposure for UK businesses of all sizes.

ESG-related D&O claims are an emerging but growing category. Claims alleging that directors made misleading statements about environmental credentials, failed to manage climate-related risks adequately, or failed to deliver on published sustainability commitments are beginning to appear in UK and European courts. Directors of listed companies with published ESG targets should ensure their D&O policy wording does not exclude claims arising from securities disclosures related to ESG matters.

Buying D&O Insurance: Key Policy Terms to Evaluate

D&O policies are complex financial lines products and should be placed through a specialist financial lines broker rather than on a general commercial insurance basis. The following policy terms are the most commercially significant and should be reviewed carefully before binding.

The definition of "wrongful act" determines what triggers coverage. Broad definitions that include errors, omissions, misleading statements, and breach of duty (as well as deliberate wrongdoing subject to conduct exclusions) provide better coverage than narrow definitions limited to specific legal causes of action. Conduct exclusions (for deliberate fraud or criminal acts) are standard and appropriate; they should not be so broadly drafted as to exclude coverage pending investigation of an allegation before any finding of wrongdoing is made.

The advancement of defence costs provision determines whether the insurer pays legal costs as they are incurred during a claim, or only after a final resolution. Policies that advance defence costs - rather than reimbursing them at the end - are significantly more valuable for directors who need to fund a legal defence from the outset of a regulatory investigation or civil claim without waiting for the insurer's final coverage determination.

FAQ

Does a small private company need D&O insurance?

D&O insurance is not legally required for any company regardless of size. However, the personal liability exposure created by Companies Act 2006 director duties applies to directors of all UK companies, including small private ones. The most common D&O claims against small company directors arise in insolvency - where a liquidator pursues directors for wrongful trading, misfeasance, or preferences. Given that Side A cover operates precisely when the company cannot fund an indemnity, D&O is arguably most important for directors of smaller companies where the company's financial resilience is lower.

Can a company's articles of association protect directors from personal liability?

Section 232 of the Companies Act 2006 renders void any provision that exempts a director from liability to the company for negligence, default, breach of duty, or breach of trust. Articles of association cannot override this. A company can fund D&O insurance under Section 233, and it can provide a qualifying third-party indemnity under Section 234 for third-party claims (not claims by the company itself). Neither removes the underlying liability; they provide financial resources to meet it.

Are non-executive directors covered by the same D&O policy as executive directors?

Typically yes. Standard D&O policies define covered persons to include all directors, officers, and in many cases senior managers of the insured entity, regardless of whether they are executive or non-executive. Some policies extend cover to shadow directors (individuals in accordance with whose directions the directors are accustomed to act). Non-executive directors should confirm their coverage position with the company's broker, particularly where they sit on multiple boards and each has a separate D&O policy.

What is wrongful trading and how does D&O cover relate to it?

Wrongful trading (under Section 214 of the Insolvency Act 1986) arises when a director continues to trade knowing (or when they ought to have concluded) that there is no reasonable prospect of avoiding insolvent liquidation, and fails to take every step to minimise potential loss to creditors. A liquidator can apply to the court for an order that the director contribute to the company's assets. D&O policy coverage of wrongful trading claims varies by policy wording - some include it as a director's wrongful act; others treat it as an insolvency-specific exclusion. This should be verified with the insurer before a company enters financial difficulty.

Does D&O insurance cover FCA enforcement action against individual directors?

Many D&O policies cover the legal defence costs of regulatory investigations, including FCA investigations into individual directors or senior managers. Coverage typically extends from the point of a formal information request, not only from the point of enforcement action. Financial penalties imposed by the FCA are generally not insurable as a matter of public policy - cover for fines and penalties is typically excluded. Legal defence costs and the costs of participating in the FCA's enforcement process are the primary coverage benefit for directors facing regulatory scrutiny.

How We Verified

This article draws on the Companies Act 2006 (Sections 171-177, 232-234), Insolvency Act 1986 Section 214, FCA regulatory guidance, and market practice guidance from the Chartered Insurance Institute. Insurer descriptions are based on publicly available product documentation and financial lines market commentary as of May 2026. No insurer paid for inclusion in this article.

Sources

• Companies Act 2006 - legislation.gov.uk
• Insolvency Act 1986 - legislation.gov.uk
• FCA: Senior Managers and Certification Regime
• ABI: Business insurance and liability guidance