The effect of D&O insurance on managerial risk taking
Ius Commune Europaeum Series, Vol. 140

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.

Summary

After finishing grammar school (Gymnasium) at the Sankt Thomas Kolleg in Vechta, Germany, in 2008, Maximilian Gaber studied European and International Law at the European Law School of Maastricht University. After graduation from the bachelor course, Gaber acquired the LL.M. in Dutch law at Maastricht University.

Because of the originality of his master thesis (‘The effect of D&O insurance on managerial risk taking’), Gaber was admitted to the PhD/doctor programme under the supervision of Prof. Michael Faure. Next to researching for his PhD, Gaber worked as a legal counsel at the law firm RESOR NV in Amsterdam, which is specialized in corporate restructuring and insolvencies.