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Ensuring Corporate MisconductHow Liability Insurance Undermines Shareholder Litigation$
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Tom Baker and Sean J. Griffith

Print publication date: 2011

Print ISBN-13: 9780226035154

Published to Chicago Scholarship Online: March 2013

DOI: 10.7208/chicago/9780226035079.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 02 June 2020

Pricing and Deterrence

Pricing and Deterrence

Chapter:
(p.77) Chapter Five Pricing and Deterrence
Source:
Ensuring Corporate Misconduct
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226035079.003.0006

This chapter, which explores whether the underwriting and pricing of Directors' and Officers' liability (D&O) insurance preserves the deterrence function of shareholder litigation, examines how insurers evaluate the riskiness of the insured in underwriting D&O insurance and how they price risk. It discusses the reasons offered by study participants to doubt that the differential pricing of D&O premiums deters corporate wrongdoing or provides adequate incentives to optimize corporate governance. The chapter concludes that while D&O insurers do seek to price on the basis of risk, their efforts are not enough to strengthen the deterrence function of shareholder litigation.

Keywords:   D&O insurance, shareholder litigation, deterrence function, insurance pricing, risk, underwriting, corporate wrongdoing, corporate governance

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