This piece is by Sam Cornelius, Lead Management Liability Underwriter at rrelentless
With over a hundred regulators in the UK, insolvency rates holding at record or near-record levels, and greater requirements and pressures being placed on employers due to the introduction of the Employment Rights Act 2025, the regulatory and legal landscape for directors is becoming more complex. Directors and officers face continually changing risks, often without fully understanding their personal exposure, and this can especially be the case when it comes to SMEs. Investigations and lawsuits can be costly, with significant financial and reputational consequences for those unprepared.
However, many of the myths and misconceptions surrounding Management Liability insurance faced by SMEs can be debunked by informed brokers with access to comprehensive education. Brokers who can advise clients on the types of risks and robust cover necessary to proactively manage their exposures can be well placed to navigate evolving regulatory threats with confidence.
What is Management Liability insurance?
Senior directors and officers have a range of responsibilities and liabilities that they must fulfil. If they fail to do so, various stakeholders may bring a claim against them, and a director’s personal assets could be at risk. A claim can be brought against individuals, and a company may not, or cannot, always stand by them.
This is where a management liability insurance policy (MLP) comes in. It protects senior management, directors, and officers from personal liability and covers the company against claims arising from their professional activities. It typically includes coverage for Directors & Officers (D&O), Employment Practices Liability, and Corporate Legal Liability, and can also include cover for financial loss as a result of theft or fraud by employees or third parties.
Some policies provide financial coverage for legal costs, damages, and compensation settlements in the event of claims, as well as educational and proactive risk management support, ensuring directors are aware of their liabilities and responsibilities.
Common misconceptions
There are several misconceptions commonly held among SMEs that may leave them vulnerable to risks. Insurance brokers who are aware of these can better advise their clients on where a policy can support them as part of a holistic risk management strategy. Among these misconceptions are:
The overlooked risks of becoming a company director:
Small business owners often do not realise all the risks they take on simply by being a director, especially as roles can be less defined. Their professional background doesn’t necessarily prepare them for these responsibilities.
Take an architect who sets up their own practice. While they are highly skilled in their field, becoming a director brings an additional layer of responsibility that goes far beyond architecture. They are no longer just delivering client work; they are legally accountable for how the business operates.
That includes everything from ensuring staff are properly supported through requirements such as auto-enrolment pension schemes to understanding that their liability is not automatically removed simply because the business is a limited company.
The truth: Being a director comes with personal legal responsibilities that many business owners aren’t fully prepared for, and misunderstanding these can expose them to significant risk.
“We are too small to need it”:
There is also a misconception that only large corporates need MLP insurance. Among SMEs, there can be a lack of awareness about regulatory and legal requirements, and being small is no defence in these circumstances. With such an extensive range of regulators in the UK that could investigate an organisation, many don’t recognise the potential financial risks of these investigations. Employment claims are another common avenue of disputes for smaller businesses. The legal requirements and the attached risks of getting it wrong are the same whether you employ one person or one hundred.
The truth: no business is immune to claims, and size does not protect you against them. No matter the number, if you have employees, customers, regulators, shareholders, or any other stakeholders, you could be exposed to claims.
“I am covered by my other policies”:
Some directors mistakenly believe they are covered under corporate insurance. However, brokers need to help distinguish between personal and company liability. For example, if a company continues to trade while insolvent, it’s the directors who are personally exposed to the risk, and they carry the legal responsibility in such cases. Insurance policies, such as Professional Indemnity or Public Liability, generally do not cover D&O-related exposures. This is why an MLP policy should be included in any comprehensive insurance programme, as advised by a qualified broker.
The truth: directors are personally liable, and both they and their company carry unique risks. Only MLP policies provide the dedicated coverage needed to respond to these types of claims.
Understanding what your policy really protects:
There can be cases where there are grey areas about what management liability insurance actually covers; some think that what MLP covers is included in other types of insurance, or don’t fully understand the nature of the coverage. That’s why insurers must work closely with brokers to clearly communicate the value and what’s covered or not.
The truth: MLP policies have evolved over nearly 100 years to respond to specific claims and scenarios that are not usually covered by other types of insurance and can offer significant value for money. Brokers should consider these as part of any comprehensive insurance programme.
The evolving types of claims
The types of claims directors face today go well beyond traditional insolvency and employment disputes. For instance, cyber incidents are increasingly triggering investigations and legal action, adding a new dimension to management liability with potentially severe reputational and financial consequences. At the same time, directors confront emerging risks such as AI governance challenges in decision-making.
Additionally, health and safety prosecutions, data breach liabilities, and anti-money laundering supervision by the FCA add further layers of potentially costly claims. These diverse risks underscore the importance of comprehensive management liability insurance in protecting directors from escalating legal, financial, and reputational consequences in today’s complex environment.
The takeaway: Why holistic coverage matters
Financial cover is often an essential safety net in the event a claim is raised. However, while not a standard in the market, there are policies that combine financial protection and risk management expertise to give SMEs the tools they need to proactively manage risks and ultimately take steps to prevent issues in the first place.
This approach can empower businesses to navigate the threat landscape with confidence, as it facilitates a shift from reactive claims handling to proactive risk prevention, making it more accessible to SMEs and larger organisations alike. It also drives behavioural change by making risk management a priority of everyday business operations.
Ultimately, directors must understand personal liability as part of their everyday decision-making and take a proactive approach to ensure they are prepared for both prevention and recovery.
About Sam: Sam Cornelius is the Lead MLP Underwriter at rrelentless, bringing deep expertise in Management Liability and a proven ability to blend underwriting excellence with digital innovation. With extensive experience across Directors & Officers, Employment Practices, Pension Trustees, Excess of Loss, and Crime liability, Sam strengthens rrelentless’ mission to deliver more innovative, proactive underwriting solutions.
Before joining rrelentless, Sam served as Head of Directors & Officers and Digital Initiatives at Omnyy LLP. His career also includes roles at ARAG, AEGIS London, and Allianz Insurance, giving him a broad perspective across underwriting and product development.
rrelentless Limited is authorised and regulated by the Financial Conduct Authority (FCA Number 1034661). rrelentless Limited is registered in England (no. 13098017), registered address: 6 Beacon Way, Hull, England, HU3 4AE.
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