After large firms, insurance brokers are now designing policies to cover individual insolvency professionals against charges of sabotage and negligence during the timebound resolution of bankruptcy cases.
The insolvency resolution professional is appointed as the CEO in charge of a company by lenders during the bankruptcy proceedings at dedicated insolvency courts. Many default cases are now being tried under the Insolvency and Bankruptcy Code (IBC), and there are mounting concerns that IRPs may be exposed to litigation by erstwhile promoters and managements.
IRPs are typically attached to accounting firms. Insurance brokers are in touch with insolvency professionals who have received some work or the other in some form. They have made representations to the committees of creditors (CoC) to make the policy compulsory for all IRPs.
“Insurance brokers are in touch with 750 IRPs who have received some work or the other in some form,” said Amit Agarwal, director, JLT Independent Insurance Brokers. “We have made representations to CoCs to make the policy compulsory for all IRPs.”
Larger assignments were among the first to be covered under such an insurance shield. Smaller IRPs are paid lower fees and they may find the policy expensive. If it is made compulsory for IRPs to buy the cover, it may dissuade them from taking new assignments. The policy covers IRPs for seven years. Agarwal said that if the CoC could bear the cost of the policy, individual IRPs would have the requisite insurance cover.
“We have made representations to CoCs to make the policy compulsory for IRPs. If the CoC could bear the cost of the policy, individual IRPs would have the policy in hand. IRPs are covered for $2 million to $30 million,” said Agarwal.
The policy available in the market covers directors’ and officers’ liability and professional indemnity arising as a result of errors and omissions. Insurance brokers have brought in policies to provide cover to crisis responses, such as instances of kidnapping and demands for ransom.
Source:- The Economic Times-Mumbai