A potential increase in regulatory action and shareholder litigation against directors and corporate executives has led Markel International, the United States-listed insurer, to expand its presence in Hong Kong.
The company, which has been offering professional indemnity and directors' liability insurance in the city from Singapore since 2007, will create a service company in Hong Kong that will start operating in January.
Peter Phillips, managing director of Markel International Singapore, said the specialist liability market in Hong Kong was estimated to be worth more than US$100 million in premium income. But he thought this 'figure could grow quite substantially notwithstanding price competition' among existing insurers. This was because only about 70 per cent of publicly listed companies in Hong Kong had some form of directors' and officers' insurance cover. But for small and medium-sized enterprises and non-profit organisations, the figure was even lower, at about 20 to 25 per cent. This was at a time when there was an increasing threat of litigation or regulatory action in Hong Kong and Asia.
Phillips said: 'Hong Kong has been a priority market from the time we first joined the Lloyd's Asia platform, as it presents significant opportunities for the products and lines of business in which we specialise.'
The firm is focusing on three types of insurance, covering director's liability, new listing prospectuses and fund managers.
Phillips said directors' liability insurance would cover claims of mismanagement against board members, including unknown prior and future wrongful acts by directors who were sued by shareholders, regulators, creditors and staff.
The prospectus liability insurance covers against claims of misrepresentation or misstatement against the board or company for up to six years from the date of a company's initial public offering or road show.
The fund managers cover provides directors and officers with professional liability and crimes insurance in one policy for mutual and hedge funds, venture capitalists and REITs. Cover is underwritten through Markel's wholly owned syndicate at Lloyd's, which is currently evaluating Markel's application to launch the Hong Kong operation.
Asked to give an indication how much cover would cost, Phillips said it would depend on the size, diversity and track record of the company.
A 'senior market figure' had been recruited to run the Hong Kong operation, which is likely to be expanded to cover other insurance markets. In Singapore this already included offshore energy and product liability.
US$100 million target
The expected premium income from Hong Kong specialist liability market
The proportion of publicly listed companies in Hong Kong that have insurance cover for directors is: 70%