Risk taking in business contributes towards innovation. Yet excessive
risk taking is associated with corporate failure. Many authors have
analysed the relationship between personal liability rules of managers
and excessive risk taking. In this context, previous researchers have
often argued that insurance against personal liability of the manager
(D&O insurance) would weaken the manager's incentive to take
care.However, little is known about the workings and effects of D&O
insurance. This book analyses how D&O insurance should work ideally and
how it currently works in the USA, the UK, the Netherlands and
Germany.It illustrates how D&O insurance threatens but also benefits
society and the economy. In fact, a properly functioning D&O insurance
system can more elegantly incentivize adequate risk taking than for
example, direct regulation of managerial activity (e.g.
disqualification) or the adoption of harsher liability rules.This book
provides an overview of the implications of D&O insurance, in particular
to: - policy makers who can take concrete reform proposals from this
book;- investors who can increase their returns by using the information
on corporate D&O insurance policies;- creditors who can better estimate
their debtor's default risk by understanding the debtor's D&O insurance
policy; and- finally, prospective insurers who can learn in depth about
the D&O market, the policy design and the D&O risk