Directors & officers (D&O) insurance in India: a founder's guide

Most founders treat D&O as a listed-company formality — a box their bigger competitors tick. Then a notice arrives with their own name on it, not the company's, and the formality becomes the most important policy they own.

Running a company means making decisions that other people can challenge later. A hire, a funding term, a statutory filing, a board resolution — any of them can become the basis of a claim from a shareholder, an employee, a regulator or an investor. When that claim names a director personally, the company's other insurance usually doesn't reach it. A directors and officers liability policy is the cover built for exactly that exposure. As an IRDAI-licensed broker, what we'd want any Indian leader to understand is the shape of the cover before the brochure features: what it pays for, who it's for, what the law says, and how to tell a strong policy from a weak one.

Why D&O matters more in India now than it did five years ago

Director exposure in India has risen sharply: regulators investigate more aggressively, shareholders and employees litigate more readily, and the events that trigger personal liability — funding rounds, IPOs, governance disputes — have multiplied. D&O insurance has moved from a large-cap nicety to a working part of corporate risk management for listed and unlisted companies alike.

The roles and responsibilities of directors are under closer scrutiny than ever — from regulatory and official-body investigations to allegations around disclosures, insider trading and cybersecurity. Brokers handling Indian D&O have reported a considerable volume of claims across financial services, manufacturing, pharmaceutical and IT companies in recent years. The direction of travel is one way.

The boards that learned it the hard way

Here's the part the product pages skip. The reason D&O is now a due-diligence default in India isn't a marketing campaign — it's a series of board-level failures that rewrote what "doing your duty as a director" means. The fallout from cases like Satyam, IL&FS and ICICI Bank changed how boards, investors and regulators think about personal accountability: a director's signature stopped being a formality and became a potential exhibit. The boards that came through those years treated D&O cover as a serious financial instrument, not a tick-box — they read the wording, checked the sum insured, and asked who exactly was protected.

That shift is why an independent director today asks for proof of cover before accepting a seat, and why an investor asks for it before wiring a cheque. The law followed the lesson: the Companies Act, 2013codified directors' duties in Section 166, and Section 149(12) made independent directors personally liable for acts done with their knowledge and consent, or where they were negligent. Personal liability stopped being theoretical.

What D&O insurance covers — and what it doesn't

A D&O policy covers the legal defence costs, settlements and damages from claims that a director or officer committed a wrongful act, plus the cost of responding to a regulatory investigation. It does not cover proven fraud, deliberate criminal acts, claims known before the policy began, or bodily injury and property damage.

Good policies advance defence costs — the insurer starts paying the lawyers as bills arrive, rather than waiting for the case to end. And even where fraud is alleged, a well-drafted policy keeps funding the defence until that fraud is proven in a final judgment: the exclusion bites on the verdict, not the accusation. For a full breakdown of the covered-and-excluded picture, see what D&O insurance covers in India.

The three sides — Side A, B and C

D&O cover is assembled from three "sides". Side A protects the individual director or officer directly when the company cannot indemnify them. Side B reimburses the company when it has indemnified them. Side C covers the company itself, typically for securities-related claims. Most policies combine all three. (See how the three sides sit together on Ethika’s D&O cover page.)

Is D&O insurance mandatory in India?

For most companies, no. Under SEBI's LODR Regulations, the top-1,000 listed companies by market capitalisation must provide D&O cover for their independent directors, effective 1 January 2022. For unlisted and private companies it's voluntary — but increasingly expected by investors and lenders.

The legal scaffolding sits in two places. Regulation 25(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended with effect from 1 January 2022, requires the top-1,000 listed entities by market capitalisation to undertake D&O cover for all independent directors — a threshold raised from the earlier top-500. Separately, Section 197(13) of the Companies Act, 2013 confirms a company may pay the D&O premium for its directors and key personnel, except where a person is found liable for fraud, breach of trust or wilful default. For the full picture of who this reaches, see who needs D&O insurance in India.

Who actually needs it

Mandatory or not, the practical question is whether your situation creates the exposure D&O answers. It almost always does once a company has outside stakeholders. Listed companies carry the statutory duty; private and unlisted firms face shareholder, employee and regulatory claims without the mandate; startups inherit the risk the moment they raise institutional capital, plan an IPO, or invite a senior independent director — at which point cover usually appears on someone's due-diligence checklist. Independent directors, carrying personal liability under Section 149(12), increasingly won't take a seat without it.

How to think about choosing a policy

Two D&O policies can look identical on a one-page summary and behave very differently on the worst day. The differences that matter are mostly invisible at purchase: whether defence costs are advanced, whether independent directors have a dedicated Side A limit, how long the run-off period runs, and whether regulatory investigations are covered. The work of a broker is to make those differences visible before you sign — and to be there when a claim lands. That's the standard we hold ourselves to in how Ethika structures and handles D&O cover. We've set out the full checklist in how to judge any D&O policy, and how D&O sits alongside your other liability covers in D&O vs EPLI vs general liability.

This guide is general information on what D&O cover is and how it works in India — it isn't advice on a specific policy, insurer or situation, and nothing here is an offer. The right structure depends on your company, which is what a conversation is for.

A note on this page. Everything here is general information, not insurance, legal, financial or tax advice, and nothing is an offer. For advice about your situation, talk to us.