Insurance for new class of small business insolvency practitioners
Published 12 November 2020
Proposed legislation reforms to the Australian insolvency regime include the creation of a new class of practitioner: the Small Business Restructuring Practitioner (SBRP). The Gallagher Insolvency & Turnaround (Gallagher I&T) team has reviewed and updated our relevant bespoke insolvency insurance policies to take in to account the risks of this new professional model. Here’s a summary of the changes involved.
Gallagher I&T’s bespoke professional indemnity (PI) wording was already structured to be compliant with the requirements stipulated in ASIC’s RG258 for registered liquidators, while also including coverage tailored to the risks faced by purely turnaround specialists, including those working within the Safe Harbour legislation.
Gallagher policy wording updates include SBRP
Turnaround specialists when providing professional services to businesses undertaking turnaround/reconstruction (within Safe Harbour or not, or under the new SBRP format) have a very different risk profile compared to the risk assumed in a formal insolvency appointment. We have made necessary amendments to the relevant parts in our policy wording to specifically confirm inclusion of SBRP professional services, and to include SBRP professional services as a proportion of your overall business.
Risks involved with stepping in to deliver turnaround advice: outside directorship
When engaged to step in and provide professional advice to a business, turnaround specialists can potentially expose themselves to the risks associated with a director or officer of a company. The basis of Gallagher I&T’s bespoke OD/D&O policy is aimed at mitigating specific D&O risks which can be incurred by a turnaround specialist’s activity within the business and the perception of their role by others.
Turnaround specialists undertaking this ‘stepping-in’ activity incur risk beyond the scope of standard PI policies. Providing turnaround advice involves a completely different insurance risk to when you step in to a company and deliver that advice.
The need for a bespoke outside directorship D&O policy It doesn’t matter whether you step in as a contractor, employee or director – this risk can only be transferred away from you via a bespoke D&O cover. Engagement letters seeking to limit such exposure may not deliver suitable protection, and this is where OD/D&O cover comes in.
We’re here to help
Gallagher I&T remains committed to supporting the insolvency profession into the future, through changing conditions and challenges.
Contact your local Gallagher I&T manager to discuss our comprehensive professional risks transfer approach through a combined PI & OD/D&O solution and how this will best protect you in your provision of professional turnaround services.
With the launch of the SBRP classification to commence soon, Gallagher I&T’s combined PI and OD/D&O solution will further demonstrate its effectiveness in supporting the risks of turnaround work, regardless of engagement size.