Willis Group Publishes Global D&O Liability Guide Covering 51 Countries

It is vital for senior executives to identify and understand theirliabilities when considering international expansion or acquisitionactivity and prior to accepting overseas board appointments. TheWillis D&O team, bringing its specialist knowledge, has partnered withleading law firms around the world to bring this material together inone easy to manage reference tool.

With the number of claims against Directors and Officers reachingan international all-time high, this 600-page compendium, the mostextensive of its kind to date, will be an invaluable reference forsenior level executives, corporate counsels, company secretaries andrisk managers.

The publication, which will give readers important information aswell as a competitive edge, provides chapters on each jurisdiction,setting out key issues as well as matters relating to corporategovernance and regulatory requirements.

The main features of each chapter include:

-- Definitions of "Director" and "Officer" (where applicable)

-- Key areas to watch out for

-- Who may sue Directors and Officers

-- The local legality of Directors' and Officers' Insurance in common and codified law

-- Procedural requirements

-- Tax implications

-- Corporate governance developments

-- Key trends relating to Directors' and Officers' Liability Insurance

Willis Group Holdings Limited (NYSE: WSH) is a leading globalinsurance broker, developing and delivering professional insurance,reinsurance, risk management, financial and human resource consultingand actuarial services to corporations, public entities andinstitutions around the world. With over 300 offices in more than 100countries, its global team of 15,800 associates serves clients in some180 countries. Additional information on Willis may be found atwww.willis.com.
Willis' D&O Practice Leaders are available for comment:
UK & International
Nathan Sewell
+44 (0)20 7975 2522
sewelln@willis.com

North America
Ann Longmore
+1 212 837 0788
longmore_an@willis.com

Review copies are available to interested media by contactingAndrew Fryer at +44 (0)20 7975 2312 or by e-mail - fryerah@willis.com.

For information on purchasing the directory, interested partiesshould send an e-mail to D&O@willis.com. It will be available fromNovember 1, 2005 at a cost of UK GBP 150, US$270 or EUR 222.

Editor's Note:

1. Reasons why the liabilities of directors and officers have increased

We have already referred to the rapid rise in the liability ofdirectors and officers and highlighted below are current key issuesaffecting them:

-- Stakeholder Rights

It is no longer just shareholders that bring suits againstdirectors and officers. Bondholders, long silent on the corporategovernance front, have stepped into the limelight. Perhaps nowhere isthis as dramatically seen as in the case of Parmalat where bondholdersglobally are trying to enforce their rights, sometimes contrary to thewishes of the shareholders or enforcement bodies.

-- Role of the Institutional Investor

A further major force that has awakened is the InstitutionalInvestor. Usually a major private or public pension fund,Institutional Investors are looking at changing the rules ofenforcement; in some cases seeking to recover monies from theindividual executive, in others by continuing the dispute after theregulators have been satisfied. They have a mandate to amelioratetheir losses as much as possible. This was seen fairly dramatically inthe individual outside director payments extracted in WorldCom andEnron from directors who were not alleged to have participated infraud, but rather, "merely" to have permitted it to have occurred.

-- Transparency & Independence

In the US the Sarbanes-Oxley Act has been introduced, makingsenior executives directly responsible for financial controls.Individual board members can also suffer financially if financialmisconduct takes place. In the UK we have seen the Higgs and Smithreports extending the existing Combined Code. In Europe, the draftTransparency Directive is gaining momentum, which will enableinvestors to sue company directors if they lose money due to errors ormisinformation in the company's annual reports. This directive is oneof a number of measures being discussed under the European Union'sFinancial Services Action Plan which would create a single Europeanmarket for investors and create uniform disclosure standards for allpublicly traded companies.

The debate over the definitions of transparency and independencemay occupy us all for some years to come, but there should be littledisagreement that these issues are now often central to the dialogueon acceptable corporate behaviour. Companies and their executives arebeing made aware that what might have been legal if disclosed may beillegal if undisclosed. Transparency is the key.

Independence in the boardroom and/or within the positions ofChairperson and Chief Executive Officer, is being suggested orsometimes mandated as the prescription for reform and prevention.

-- Focus on Executive Remuneration

Traditionally, shareholders and the courts themselves did notconsider the issue of executive remuneration. This was considered tobe an internal issue, best dealt with by the companies themselves withthe courts not wishing to second guess the decisions of theorganisation as to what their chief executives were worth. This statusquo is no longer true. Starting first as a disclosure issue and now asone of accountability, after the decades of "merger mania", corporatestakeholders are now asking about and challenging the compensationpackages of those occupying the executive suite. While there arenumerous examples of this on an international basis, the case ofHollinger Inc. may serve as an example of what may be some of theemerging concerns in the area of Executive Remuneration.

-- Increased Exposures/Changing Indemnification Rights

Another theme which should not be ignored is that of the changingrights under local law to indemnify or protect the executive. Asexposures expand, we have learned to expect a commensurate increase inthe ability to protect this same group. For companies to be able toattract the best talent globally, they will be expected to haveprovided the best corporate indemnities and world class Directors' &Officers' Liability insurance. This creates a challenge for companiesto stay abreast of the local changes and make the necessary amendmentsso as to take advantage of these new advances. A recent watershedevent in this area may be the significant modifications to a company'sability to indemnify its directors and officers under the U.K.'sCompanies Act. This is clearly only one of the substantive changes yetto come.

2. Overview of Directors' & Officers' Liability Insurance Trends

Directors & Officers Liability Insurance forms a minor part of theoverall liability insurance market. For small companies, the purchaseof Directors' & Officers' Liability Insurance can be readily arrangedwithin most countries, but for global companies the buying trends aredifferent.

Regrettably, insurance is a cyclical market and at times out ofstep with the needs of those seeking to transfer risk. As this book isbeing published, we are fortunate to have favourable insurance marketconditions with companies able to negotiate broader global coverage,tailored to their specific operational and organisational risks, butthere is no guarantee as to how long this will continue. The mostsignificant development in Directors' & Officers' Liability Insurancemay be the recognition that the limits, thought to be adequate severalyears ago, are clearly insufficient for today's global company. Anoffshoot of this conclusion is that the senior parent board, oroutside directors, may need to construct coverage dedicated to protectthem when things go awry somewhere in the company's global operations.As indemnity limits rise to previously unseen heights, so too dodeductibles and retentions. It is not unusual today to see a globalcompany with a self-insured retention in the $1 million to $25 millionrange.

While terms and conditions may change based on the industry cycle,it will always hold true that there will only be a limited number ofinsurance companies that can truly appreciate the global nature ofDirectors' & Officers' exposure and only a select group ofinternational insurers that can write the coverage in a manner thatcomplies with the various applicable local laws. Identifying thesecompanies and forming long-term relationships with them can onlyresult in long-term gains for both parties.

3. The evolving role of the regulators

One of the strongest current trends in corporate governance isthat of enhanced enforcement by regulators in virtually every countryin the world. But, today's global organisation should not focus solelyon local enforcement, however rather anticipate that cooperation willexist on an international basis with possible action in more than onecountry, or by more than one country's regulators.

The International Organisation of Securities Commissioners is afully functioning body of top regulators and has existed for over 20years. Today, its members regulate more than 90% of the world'ssecurities markets. They have also created an active Joint Forum, withperhaps the world's most significant bodies overseeing the financialinstitutions sector: the Basel Committee on Banking Supervision andthe International Association of Insurance Supervisors.

This possible dual role for these government agencies, which mayboth write the regulations interpreting the relevant laws andinvestigate and/or prosecute violators, puts them in a uniqueposition.

While convergence can be a positive force, making it easier forglobal organisations to comply with local standards on a global basis,a concern is the potential extra-territoriality of some of the newlegislation and regulation that has been enacted or is beingcontemplated. One of the best examples of this might be Sarbanes-Oxleyin the United States. This requires compliance from all companieswhich report to the Securities and Exchange Commission (SEC),essentially all companies that access the U.S. securities markets.While many of its requirements may also be found within local countrycodes of governance, Section 404 has caused great consternation. Thisrequires every reporting company and its external auditors to describeits financial control mechanisms.

We anticipate significant developments in the area of regulationand particularly the impact these will have on global organisationsand will report on these matters in our next edition of the WillisWorldwide Directory of Directors' and Officers' Liability.

4. Countries included: South Africa, Argentina, Brazil, Ecuador,Mexico, Paraguay, Peru, Venezuela, Canada (& Quebec), United States ofAmerica, People's Republic of China, Hong Kong, India, Indonesia,Japan, Kazakhstan, Republic of Korea, Singapore & Malaysia, Taiwan,Thailand, Australia, New Zealand, Austria, Belgium, Bulgaria, CzechRepublic, Denmark, Finland, France, Germany, Gibraltar, Greece,Hungary, Ireland, Isle of Man, Israel, Italy, Netherlands, Norway,Poland, Portugal, Russia Federation, Spain, Sweden, Switzerland,Turkey, United Kingdom, Saudi Arabia, United Arab Emirates