Deductible in the D&O insurance
Statutory compulsory deductible in D&O insurance
Since August 5, 2009, the German Act on the Appropriateness of Management Board Remuneration (VorstAG, Section 93 (2) AktG) has stipulated that a company D&O insurance policy for Management Board members must include a deductible of at least 10% of the loss and may not exceed one and a half times the fixed annual remuneration. This means that 1.5 times the gross annual fixed remuneration in the year of the breach of duty is the upper limit in the event of a claim for those affected.
Conclusion: In the event of a breach of duty, the Executive Board member concerned must pay at least 10% of the loss - but no more than 1.5 times their annual remuneration.
Does this regulation also apply to GmbH managing directors?
No. Although the liability principles of management boards (AktG) and managing directors (GmbHG) are similar, the statutory mandatory deductible does not apply to managing directors of GmbHs. However, it applies not only to public limited companies (AG), but also to Societas Europaea (SE) and other company forms.
Does this also apply to supervisory board members in the AG/SE?
There is no legal obligation for Supervisory Board members to agree a deductible. In the past, however, the 2019 version of the German Corporate Governance Code (GCGC) recommended a comparable deductible for Supervisory Board members. However, this is no longer included in the current 2022 version of the Code. As a result, only a few companies have integrated this deductible into their articles of association and thus into their corporate D&O programs.
Coverage gap in the event of damage. Solutions?
The legally prescribed excess creates a gap in cover for corporate D&O insurance policies, as they do not cover 100% of the loss. Those affected therefore again bear the risk of being held liable privately.
Insurance providers have reacted to this legal situation and offer appropriate solutions:
Separate D&O deductible insurance policies that cover the statutory deductible, usually as a supplement to the company D&O policy.
Personal D&O insurance, which is a fully comprehensive D&O insurance policy - including cover for the statutory deductible
In practice, personal D&O insurance often makes more sense. This is because, in addition to covering the deductible, it offers:
A separate, non-shared sum insured, independent of the company D&O.
Full control, as the board member herself becomes the policyholder and decides on the amount of the sum insured and content.
- Coverage/participation in voluntary settlements, which are significantly more relevant in practice than the statutory deductible.