Directors' insurance and what it does not cover: what to do in the first ten days determines whether a board member facing a claim keeps any real financial protection. Standard D&O policies written for Swedish boards exclude wilful misconduct, criminal fines, and, in many cases, claims tied to the company's own insolvency, in ways directors rarely expect until a claim actually lands. The first ten days after notice of a claim are usually decisive, because notification deadlines and admission-of-fault clauses in the policy are strict and cannot be repaired after the fact.
Who this concerns
This concerns directors and deputy directors of Swedish limited companies, particularly those serving on boards of subsidiaries inside larger groups, portfolio companies of private equity owners, or businesses moving toward financial distress. It also concerns former directors who have already left a board but face a claim relating to acts during their tenure, and it concerns anyone sitting on a board where the parent company or ultimate owner is based outside Sweden and has arranged group-wide directors' and officers' cover through a foreign broker.
The broader picture on director exposure, separate from the insurance question, is set out in the overview of director liability. Read together with this material, that overview explains why the insurance question and the liability question are related but never the same thing.
Where a Swedish subsidiary is covered by a group policy incepted abroad, the wording, the retroactive date, and the address for notification are usually set by the foreign parent's insurance programme rather than by the Swedish board itself. That is precisely where directors most often discover, at the point a claim lands, that a policy they assumed covered them in fact does not name the Swedish entity, or applies a retroactive date that predates their own appointment.
What the law says
Personal liability of a director under Swedish company law is a separate question from whether an insurance policy responds to a claim. The rules on directors' liability for damages set out when a director is personally liable to the company, to a shareholder, or to a third party. Insurance does not change that liability. It only determines whether, and to what extent, the financial consequence of an established liability is paid by an insurer instead of out of the director's own assets.
A directors' and officers' policy is a private law contract, governed by the general rules on insurance contracts and by its own terms. It sits alongside the statutory liability regime, not instead of it. Under Swedish law as it currently stands, a limited company is not required to carry directors' and officers' insurance at all. Whether the cover exists, and what it actually promises, is entirely a matter of what was negotiated and signed, not something imposed by statute.
Where a company approaches capital deficiency, the rules on personal liability for the company's obligations, triggered once a required balance sheet or restructuring step has been missed, apply regardless of any insurance arrangement in place. This is precisely why an exclusion for claims "arising out of, or connected with, insolvency" is one of the most common clauses in the market: insurers treat this liability path separately from ordinary mismanagement claims, and price and exclude it accordingly.
How it works in practice
What a standard policy excludes as a matter of course
Most policies exclude, in some form: deliberate or dishonest acts once established as such; fines, penalties, and taxes, which are treated as the director's own consequence rather than an insurable loss; claims known to the director before the policy began (the "prior knowledge" exclusion); and claims brought by one insured director against another on the same board (the "insured versus insured" exclusion). None of these exclusions require a court finding before the insurer can rely on them provisionally while a claim is being assessed.
The notification clause and the first ten days
Directors' and officers' cover is almost always written on a claims-made basis: what matters is when the claim is notified, not when the underlying act occurred. Notification clauses typically require the director, or the company on the director's behalf, to notify the insurer within a defined period after becoming aware of circumstances that could give rise to a claim. Late notice is the single most common reason cover is declined, ahead of any dispute about the substance of the claim itself. In the first ten days: notify the insurer in writing, following the exact notification route in the policy; avoid any written or verbal admission of liability to the counterparty; instruct counsel before responding substantively to the claim; and preserve every document that might later matter, rather than waiting for a formal request.
Retroactive date and continuity gaps
A policy only responds to wrongful acts occurring after its retroactive date. When a company changes insurer, the new policy's retroactive date should be matched to the previous policy's inception, or an earlier acts exclusion. If it is not, a gap opens: directors who served before the retroactive date are exposed for that period with no cover at all, even though a policy has technically been in place continuously.
Advancement of defence costs versus a promise to indemnify
Policies differ sharply on cash flow. Some advance defence costs as they are incurred, subject to repayment if the claim is later found to fall within an exclusion. Others only reimburse costs after the claim has been finally resolved, which means a director may have to fund a defence personally for months or years before any indemnity is confirmed. This distinction matters more than the headline limit in almost every real dispute.
Cover for the company versus cover for the individual
Cover that reimburses the company for indemnifying a director is a different layer from cover that protects the director directly when the company cannot or will not indemnify. When the company itself is insolvent, the layer that depends on the company paying first, or reimbursing later, may be unavailable or subordinated to other creditors' claims. In a distress scenario, only the direct, individual layer of the policy protects the director in practice, and that is exactly the scenario in which directors most need it.
Run-off cover after resignation or a change of control
Cover for acts during a director's tenure continues after resignation only if an extended reporting period has been purchased, or the policy provides for it by default. A change of control, an insolvency filing, or a company sale can trigger automatic run-off cover, but the length of that cover is limited and set out in the policy, not left open-ended. A director who is considering resigning from a board should check whether run-off has been bought before treating the resignation as closing the exposure; timing and its financial effect are addressed separately in the material on resigning from the board.
What to check before assuming a policy will respond
- The retroactive date against the director's own actual start date on the board
- Whether the policy is written on a claims-made or an occurrence basis
- The exact wording of the notification clause and the address or portal it requires
- Whether an extended reporting period has been purchased, and for how long
- Whether the insolvency-related exclusion applies to the specific facts of the claim
- Whether the policy limit is shared across all directors or dedicated to each individually
- Whether defence costs are advanced as incurred or only reimbursed after final resolution
Does directors' insurance cover claims where the company itself is insolvent?
Often not in full. Many policies carve out claims connected with insolvency, or make the company-level layer unavailable once the company cannot indemnify. The direct, individual layer of cover is more likely to respond, but the specific wording of the insolvency exclusion in the policy has to be checked against the actual basis of the claim before assuming any protection exists.
Can the insurer decline cover after a director has already instructed counsel?
Yes, if instructing counsel led to costs being incurred before the insurer consented, or if the director admitted liability while dealing with the claim informally. Most policies require the insurer's consent before defence costs are incurred and treat any earlier admission as a breach of the policy's own conditions, independent of whether the underlying claim would otherwise have been covered.
What happens to cover once a director has resigned from the board?
Cover for acts during the director's tenure can continue after resignation, but only to the extent an extended reporting period, sometimes called run-off cover, has been arranged. Without it, a claim notified after resignation may fall outside the policy period entirely, even though the underlying conduct occurred while the director was still serving on the board.
The numbers
There is no statutory figure governing policy limits, deductibles, or notification periods for directors' and officers' insurance. Every one of those numbers, the aggregate limit, the retention applied before cover responds, the length of the notification window, and the length of any extended reporting period, is fixed by the individual policy's schedule, not by law. Two boards in the same industry, insured through different brokers, can face materially different numbers on every one of these points. The only reliable source for any of them is the current policy certificate and schedule itself, read in full, not the renewal summary or the broker's cover note.
Where it usually goes wrong
Directors assume personal cover exists simply because "the company has D&O insurance," without checking that the layer protecting them individually is the one that actually applies to their situation; when the company is solvent, the insurer can point the director back to the company for indemnification first. Notification is delayed because a director tries to resolve a dispute informally before involving the insurer, which by itself can be treated as late notice regardless of how the dispute is later resolved. An admission made in an email or a meeting with the counterparty, before the insurer has even been told about the claim, can trigger an exclusion that no later correction can undo.
Group policies placed abroad are assumed to extend automatically to the Swedish subsidiary, when the Swedish entity was never added as a named insured on the schedule. Retroactive dates are assumed to match the director's own appointment, when in fact the policy was renewed with a later date after a change of insurer, leaving a gap for exactly the period a claim now concerns. Directors resign from a board without buying run-off cover, then discover months later that a claim for conduct during their tenure falls outside the policy period entirely.
Where the claim involves a counterparty or an insurer based outside Sweden, the notification route, the governing law of the policy, and even the definition of what counts as a "claim" can follow a different market's conventions rather than Swedish practice, which is another reason the policy document itself, not general assumptions about how D&O cover works, has to be the starting point in the first ten days.
What to do next
Within the first ten days: obtain the actual policy document, not the renewal certificate summary, and check the retroactive date, the notification clause, and the insolvency-related exclusion against the specific facts of the claim before deciding what the policy actually promises. Where a discharge from liability resolution is also being considered by the general meeting, that is a different protection with different limits, addressed in what discharge from liability actually limits; an insurance policy responding and a discharge resolution being passed do not close the same exposure, and directors frequently assume otherwise.
For a director notified of a claim in the last ten days who needs to establish quickly whether the policy responds and how much of that window has already been used, that assessment is the next step: arrange an assessment.