Legal Updates

 Commercial LitigationNovember 29, 2023

D&O Insurance: Impact of Individual Accountability Framework

Share this

Download PDF

For further information on any of the issues discussed in this publication please contact the related contact(s) on this page.

The Central Bank (Individual Accountability Framework) Act 2023 (‘the Act’) has been introduced with the aim of providing for enhanced individual accountability and to promote positive behaviour and improved governance in regulated financial service providers. The Act has been signed into law and is partially operational. A key element of the Act is the Senior Executive Accountability Regime (‘SEAR’) (discussed here), which places obligations on certain firms and their senior individuals to set out clearly where responsibility and decision-making lies and to identify what those responsibilities entail. In this article, we will consider possible consequences of the new regime on directors and officers liability insurance (‘D&O insurance’) and what factors need to be considered in terms of coverage.

Changes under the Act

The Central Bank of Ireland (‘CBI’) investigates and sanctions breaches of financial services law by regulated firms and individuals. SEAR will provide the CBI with increased capability to hold individuals, whose firm comes within the scope of the regime, to account when regulatory requirements are breached in their area of responsibility. There are also new conduct standards that apply to all regulated firms and their management and employees, enhancements to the Fitness and Probity Regime and amendments to the CBI’s enforcement processes under the Administrative Sanctions Procedure, including the ability to take action directly against individuals for breaches of their obligations.

D&O coverage

These additional obligations, particularly on senior individuals, along with the reforms to enforcement processes, means that D&O insurance coverage has become a key area of focus for directors and officers and their insurers due to the potential for additional risk. It is possible that this may cause an increase in premiums for D&O insurance.

In preparation for the full implementation of the Act, some practical steps to consider when reviewing an existing D&O insurance policy or taking out a new policy include:

  • Review of the "insured person" definition in the policy to ensure it includes all individuals who fall within the SEAR regime.
  • Review of the policy to ensure that it covers SEAR investigations and (to the extent insurable) sanctions.
  • Review of the level of indemnity, financial thresholds and aggregate limits to ensure sufficient coverage, bearing in mind the possibility that cover may be needed for multiple persons for the same regulatory breach. Policyholders might consider negotiations with their insurers to increase limits of cover in light of possible increased financial demands on the policy.
  • Consideration by independent non-executive directors of any specific terms of the policy which may affect their coverage in the event of a SEAR investigation.
  • Consideration of any potential gaps, where relevant, between coverage provided by a D&O insurance policy and other relevant insurance policies for the company.
  • In circumstances where the CBI may pursue investigations against regulated financial service providers and (potentially several) individuals from within the entity in relation to the same regulatory breach, there is the potential for conflicts of interest to arise among the various insured persons, requiring separate legal representation. It should be confirmed that the cost of separate legal representation is adequately covered, and that the available cover for costs is not eroded or exhausted by one insured person to the detriment of others.

When will the provisions come into force

While the Act has been signed into law, some of the major reforms are not yet operational. Consultation Paper 153, which included draft regulations in respect of SEAR and certain aspects of the enhancements to the Fitness and Probity Regime, closed for feedback on 13 June 2023 (see here for further detail) and on 16 November 2023, the CBI published a Feedback Statement, with amended draft regulations and guidance on the IAF. Consultation Paper 154 dealing with proposed changes to the Administrative Sanctions Regime closed for feedback on 14 September 2023 and a feedback statement of the CBI is awaited (see here for further detail). Conduct standards will begin to apply from 29 December 2023 and SEAR is due to apply to firms within scope from 01 July 2024 and to (independent) non-executive directors at in-scope firms from 01 July 2025.


In recent years there has been an increased focus in many jurisdictions on individual accountability in order to improve governance and increase transparency. In 2016, the UK introduced an equivalent regime, the Senior Managers & Certificates Regime (SM&CR), which aims to promote the safety and soundness of regulated financial services firms by enabling regulators to hold senior managers to account. As such, those within scope in Ireland can benefit from the experience of other jurisdictions in this context.

While the Act is not yet fully operational, a review and assessment of D&O insurance in light of upcoming changes is a prudent step at this point for affected firms and individuals.

Further information on the updated CBI procedures for fitness and probity investigations, suspensions and prohibitions, which are being introduced in order to give effect to the Act can be found here, while Dillon Eustace also hosted a webinar on the IAF and its likely implications for regulated firms.

DISCLAIMER: This document is for information purposes only and does not purport to represent legal advice. If you have any queries or would like further information relating to any of the above matters, please refer to the contacts above or your usual contact in Dillon Eustace.

Copyright Notice: © 2023 Dillon Eustace LLP. All rights reserved.