Research On The Directors' And Officers' Liability Insurance System

Directors' and Officers' Liability Insurance, which is called D&O insurance for short, means that when the directors and officers take the responsibility of compensation for the companies' or a third party's economic losses made by them in work by fault, the insurance companies take the responsibility according to the insurance contract.The D&O insurance system came into being in U.S. It has been about 70 years developing history since 1934 when the Lloyds firstly brought it out ,which is the biggest insurance institution in Britain. With practicing and renewing for many years, the legislation on D&O insurance has been comparatively perfect in the Euro-American countries. Along with the economic globalization, some countries of continental law system such as Japan and German start to introduce and transplant the D&O insurance system; and after the domestic academic discussion and practicing in the market, this system became localized gradually and worked well.The D&O insurance system was designed to protect the interest of the directors and officers so as to make the company stable and the market economy operated orderly. Under the condition of market economy, companies face more risk if they want more returns; and directors and officers often undertake huge risk for good performance because they are the real business dealer and main decision makers in companies. With development of the system of joint-stock company and enhancement of regulation in securities market, shareholders' suits increased massively. Once the directors and officers lose the suit, they have to pay a lot of money that is far more than their income. So the D&O insurance system was bom for the purpose of balancing this kind of non-equivalences and making directors and officers keeping their minds on work better.The economic reform has been many years in China and the reform mainly aimed at constructing socialism market economy. The corporate system well done in the developed countries is such an important part of market economy that it became a primary model for our learning. Nowadays, there are all kinds of corporations in our markets and also a lot of inevitable problems in the developing progress of the corporate system, for example, with directors' rights expanding, shareholders' interests may be neglected and infringed, etc. In order to resolve such problems, we have to learn more experiences about the corporation-related systems in developed countries, and the D&O insurance system is exactly one of which.Since our socialism market economy is come from a planned economy, there are many problems left by history. And many systems and laws well done in west developed countries could not meet the situation of our country, which demands us continuing economic reform on the one hand, and thinking about the localization of laws on the other hand.How to achieve the localization of laws is exactly one of the problems this paper would like to resolve. D&O insurance which appeared officially in China from 2002 has been developing slowly in all the time, and there has been no claim with the insurance company ever happened, which forced us to have a sobering thought. The study methods are historical analysis and comparative study. On the one hand, the paper analyzed the origin and developing history of the D&O insurance system, especially focused on the transplantation of Japanese D&O insurance; on the other hand, through comparing the difference between the economic and legal situation of different countries including China, The U.S, and Japan, the paper made a conclusion that although China does have the conditions for the D&O insurance system to exist and develop, there still are a lot of work to do with the reform of economic system and legislation because of our special situations. At the same time, before the changes of economic system and legislation, the D&O insurance contract in use now should be amended based on the present laws so as to have a real function partly to a certain extent. All in all, I hope my study could do something for better development of Chinese D&O insurance system.