The Governance Premium: Why D&O Belongs in the Capital-Raising Conversation

Standfirst

D&O insurance was built to protect directors and officers from personal liability. In a capital raise, listing or refinancing, it can also form part of the governance evidence investors and lenders review when assessing board preparedness, regulatory exposure and transaction risk. The issue is no longer only whether cover exists, but whether the programme reflects the company’s current governance and capital-market profile.

Key Takeaways

• D&O can support capital-raising confidence to investors and board members when it is current, board-approved and aligned to the company’s litigation, regulatory and transaction exposures.
• Capital transactions create different director-risk profiles. Aon notes that financial liabilities can disrupt the balance sheet and affect valuations and investor appetite during a company’s growth cycle.
• UAE governance expectations are becoming more demanding, particularly for financial institutions and regulated entities under Federal Decree-Law No. 6 of 2025, which strengthens the CBUAE’s supervisory and enforcement powers.

Governance Is Becoming Part of the Capital Story

A capital raise is not only a test of growth plans, earnings visibility or market timing. It is also a test of governance evidence. Investors, lenders and transaction advisers increasingly look for signs that the board understands the risks attached to leadership decisions, regulatory obligations, disclosure standards and stakeholder claims.

D&O insurance should not be overstated as a valuation tool. It does not, by itself, improve pricing or secure better financing terms. But it can reduce uncertainty during diligence when the programme is properly structured, reviewed and documented. A current D&O programme shows that the company has considered how director and officer exposures would be funded if a claim, investigation or transaction-related dispute arises.

From a CRI advisory view, the issue is not whether the organisation has purchased cover. It is whether the programme still reflects the risk profile that investors, lenders, regulators and directors themselves are assessing.

Why This Matters Now

The capital-raising environment is more selective. IPO candidates and private companies seeking institutional capital are being assessed not only on financial performance, but also on public-company readiness, governance controls and the quality of risk management. EY’s Global IPO Trends report highlights the need for IPO candidates to focus on agile financial strategies, risk management practices and public-company readiness when market windows are volatile.

In the UAE, director and executive management liability is also grounded in company law. Federal Decree-Law No. 32 of 2021 states that board members and executive management may be liable to the company, shareholders and third parties for fraud, abuse of power, violations of law or the company’s constitutional documents, and mismanagement.

For financial institutions, insurers, payment firms and other entities within the CBUAE perimeter, the regulatory environment has become more demanding. Federal Decree-Law No. 6 of 2025 consolidates banking, insurance, payments and financial market infrastructure regulation under a strengthened Central Bank framework. It also expands supervisory tools, including early intervention powers, and introduces higher administrative penalties for both the directors/officers personally and the company itself. 

For companies outside the direct regulatory perimeter, the implication is indirect but still relevant: lenders, investors and regulated counterparties may expect stronger governance evidence from businesses seeking capital or entering material financial relationships.

What a D&O Programme Actually Signals

D&O cover is not a single protection. It is a structure. Marsh describes public-company D&O as typically containing three core components: Side A, which protects directors and officers when the company cannot or will not indemnify them; Side B, which reimburses the company for indemnification costs; and Side C, which can provide entity protection, generally for securities claims in public-company policies.

That structure matters during a raise, listing or refinancing because different stakeholders read different parts of the programme. Directors focus on personal asset protection. The company focuses on balance sheet exposure and indemnification obligations. Investors and lenders may look at whether the programme is proportionate to the company’s size, ownership structure, regulatory environment and transaction roadmap.

A policy renewed on legacy limits may protect against yesterday’s risk profile. A programme reviewed against the current capital structure, board composition, regulatory exposure, shareholder base and transaction plan is a stronger governance signal.

Where the Gap Usually Appears

The gap is rarely the complete absence of D&O. More often, it sits in the detail.

Limits may not have been tested against the company’s current scale or transaction exposure. Side A protection may be insufficient for directors joining ahead of a listing or institutional raise. Investigation costs may not be aligned to regulatory exposure. Run-off arrangements may not be considered before a change in control. Retroactive dates, exclusions, securities claims wording and defence-cost provisions may not have been reviewed with the same discipline as the financial model.

This is where D&O becomes a board issue. A programme that is only reviewed as an annual insurance renewal may miss the point at which governance risk becomes capital risk.

Recommendations for Senior Leaders

1. Review D&O before the transaction timetable is fixed: Do not wait until the final stages of a raise, listing or refinancing. Test the programme early against the proposed transaction structure, investor profile and board composition.
2. Benchmark limits against current exposure: Reassess limits using revenue, asset base, market capitalisation expectations, regulatory exposure, shareholder profile and comparable companies where data is available.
3. Stress-test the policy wording: Review Side A, Side B and Side C protection, investigation costs, exclusions, defence-cost advancement, retroactive dates and severability provisions.
4. Evidence board approval: A board-approved D&O programme carries more credibility than a renewal handled only as an administrative insurance purchase. Record the basis for limits, structure and material coverage decisions.
5. Align D&O with governance and disclosure controls: D&O should sit alongside legal, finance, compliance and investor-relations readiness. Insurance cannot replace governance discipline, but it can support the company’s ability to respond when governance is tested.

Closing

The governance premium is not created by buying a policy. It is created when the board can show that director and officer risk has been assessed, funded and governed with the same discipline as any other capital-market exposure. For companies preparing to raise capital, list or refinance, D&O should move from the renewal calendar to the capital strategy discussion.

Source Notes

• Aon: D&O insurance, capital raising, balance sheet impact, valuations and investor appetite.
• Marsh: Side A, Side B and Side C D&O coverage mechanics.
• UAE Federal Decree-Law No. 6 of 2025 / CBUAE regulatory framework and enforcement powers.
• UAE Commercial Companies Law, Federal Decree-Law No. 32 of 2021, director and executive management liability.
• EY Global IPO Trends Q2 2025, IPO readiness and risk-management context.