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Insurers dig into corporate diversity practices when lawsuits pile up



(Reuters) – US insurance companies are taking a closer look at recruitment and inheritance practices among corporate clients, worried about litigation due to a lack of diversity among top executives and board members, industry sources say.

Insurance companies meet company officials to examine diversity practices before renewing or signing new board members and executives' liability policies, say insurers and brokers.

Before pricing is covered, insurers want details about top placement planning and how companies recruit, they said.

"This is an operational risk that will not go away," said Amber Finch, a lawyer who negotiates insurance coverage for companies. It will require listed companies headquartered there to name board members from under-represented communities.

Insurers are changing practices after Minneapolis police killed George Floyd, a black man, on May 25 and began protests across the country. At least seven lawsuits have been filed against large U.S. companies claiming to have shortcomings in diversity practices.

For example, a lawsuit filed in September against Cisco Systems Inc. board members violated their duty by not having a black director.Reportant's law firm, Robbins Geller Rudman &. Dowd LLP, is prominent in shareholder disputes.

In a statement, Cisco characterized the case as one of several identical lawsuits against U.S. companies that already appear to have “strong diversity and inclusion initiatives. .

D&O coverage has become more expensive in recent years due to more lawsuits over what the plaintiff describes as widespread racial and gender discrimination, sexual harassment or general corporate abuse.

A decision by the US Supreme Court from 201

8 supplemented the issue by allowing certain securities cases to continue in both state and federal courts. Insurers often pay for settlements, judgments and defense of cases.

The latest lawsuits are about, says Tricia Melley, who is head of North America's professional requirements for Axa XL, an Axa SA unit. Her group held a meeting with insurers in mid-September to discuss legal risk, she said.

"It's something we'll need to look at," says Melley. has also met with corporate clients to better understand diversity practices and improvement plans, says Jim Seymour, whose division writes D&O coverage.

Underwriters previously responded to public documents, such as power of attorney statements, he said. That is no longer enough.

Insurers also want to know which board members are retiring and the companies' plans to replace them, says Christine Williams, who is head of the insurance broker Aon PLC's financial group.

Insurers want to see companies using recruiters. and HR teams to veterinarian a broad group of candidates rather than relying solely on organizational charts, Williams said.

"The concern is about the lack of different leaderships and how you affect the company when you go down," Williams said.


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