MITIGATING & MANAGING RISK

Practical guidance for risk professionals

In this new era of deregulation, risk management is challenging for all forms of organizations — public, private, and nonprofit — in virtually every industry. Ultimately, each organization must assess what jurisdictional and industry-specific laws, rules, regulations, and norms apply to it, in consultation with legal counsel, insurance broker partners, and other trusted advisors.

The following questions offer a starting point for this analysis:

01 What risks should our organization prepare for in a new era of deregulation?

02 Who within the organization is tasked with identifying trends and risks? Who is responsible for monitoring and owning the process?

03 Will regulatory changes impact our daily operations? If so, how?

04 What new compliance practices may be necessary?

05 Will deregulation offer more or fewer opportunities for growth?

06 What can we do to mitigate these risks?

07 How should our risk management and insurance strategies adapt to meet new regulatory challenges?

08 What do board and C-suite engagement and ownership look like for our organization?

Coverage implications

Depending on the matter at hand, insurance coverage for regulatory investigations can be found in a number of policies. These include:

D&O.
Employment practices liability.
Wage and hour liability.
GPL.
E&O/professional liability.
Cyber.
Regulatory billing policies for healthcare organizations.

The high costs of defending investigations, however, have led some insurers to limit or exclude coverage, require coinsurance and higher retentions, or reduce capacity. Across the board, management liability underwriters are giving closer scrutiny to organizations’ loss histories and business practices.

Antitrust investigations historically have generated multimillion-dollar settlements, which has led some insurers to exclude coverage for antitrust matters or provide defense-only coverage. This varies by industry. Healthcare and education systems, for example, are seeing D&O insurers restrict coverage for regulatory and antitrust exposures.

Policy wording matters: It is crucial for organizations to understand how their policies' terms -- including sublimits, deductibles, and self-insured retentions -- align with their management liability exposures.

Recommendations

Operating in an era of deregulation and fast-changing rules is difficult, and it’s unclear how long this environment will last. To mitigate regulatory risk, Lockton recommends the following for companies, boards, and senior executives:

Continue

to monitor changes in the regulatory landscape and government policies.

Create

a process to identify, gather, monitor, and own risk assignments.

Adhere

to the highest standards of compliance. Where regulations differ among jurisdictions, a prudent path is to align practices around the strictest requirements.

Optimize

insurance policy language, limits, and structures to prevent coverage gaps.

Choose

insurance partners carefully, and look to build strong, long-term relationships. Insurance companies differ in their underwriting and claims approaches to professional and executive liability.

Work

with a broker and risk advisor that understands the complexities of the professional and executive liability space.