Directors and officers insurance (D&O): what it is for, what it costs, who needs it

Directors and officers insurance, known in France as RC dirigeants or RCMS (responsabilité civile des mandataires sociaux) and internationally as D&O, pays the defence costs and damages a company director must otherwise cover from personal assets when held liable for a fault committed in the exercise of their mandate. It costs €500 to €2,000 a year for a young company, €2,000 to €8,000 for an SME with €1 million to €20 million in revenue, and becomes almost systematic as soon as an investor joins the cap table. It is not compulsory, but the law does not protect the director: it names them.

Directors insurance, RCMS, D&O: what exactly are we talking about?

Three names for the same contract. RCMS is the historical French term, D&O the one you will find in shareholders' agreements and term sheets, and "RC dirigeants" the commercial name used by most insurers. In every case, the insured is not the company but the natural persons who run it, including de facto directors, those who exercise power without holding the title.

A corporate officer (mandataire social) is the natural person appointed by the articles of association or the shareholders to represent and bind the company: the manager of a SARL, the president or chief executive of a SAS or SA. Unlike an employee, they are not shielded by a subordination relationship: they answer for their management decisions with their own assets, without any statutory cap, and for several years after leaving office. This is what separates the contract from professional liability insurance, which protects the company; directors insurance protects the human being behind the company.

In which situations is an SME director actually sued?

The French Commercial Code sets out three grounds. Articles L. 223-22 (SARL) and L. 225-251 (SA, extended to the SAS) make directors liable for breaches of laws and regulations, breaches of the articles of association, and mismanagement. Article L. 651-2 adds, in the event of judicial liquidation, the action for insufficiency of assets: the liquidator may ask the director to personally cover all or part of the company's debts if mismanagement contributed to the shortfall. Since the 2016 Sapin 2 law, mere negligence is no longer enough, but continuing a loss-making activity, filing for insolvency late or keeping deficient accounts remain classic faults.

The context makes this risk concrete. According to the Banque de France, 68,564 companies entered insolvency proceedings over the twelve months to December 2025, a record, up 3.5% year on year. Every liquidation opens the door to a review of past management. The broker Howden also notes, in France, a return of claims linked to governance and financial communication.

Three other scenarios recur in SMEs: employment litigation in which an employee personally targets the director for harassment or discrimination; a claim by a minority shareholder or an investor contesting a decision or a dilution; and administrative investigations (Urssaf, DGCCRF, tax authorities, CNIL), with lawyers' fees to be incurred before anyone knows whether a penalty will follow.

What does directors insurance actually cover?

The first item, and the most heavily used, is defence costs: lawyers, experts and procedural costs, in civil, criminal and administrative proceedings, advanced by the insurer without waiting for the outcome. On an ordinary commercial dispute, defence costs €20,000 to €80,000 over two to three years; on a complex case, it exceeds €100,000.

The second item is financial consequences: the damages the director is ordered to pay, including for insufficiency of assets, up to the policy limit. Common support covers come on top: crisis communication, psychological support, criminal bail, asset freezes.

The law does not ask a director whether they can afford to answer for their management: it tells them that they answer for it. Directors insurance is the only tool that puts a numerical cap on what that liability can cost them.

Two mechanisms deserve a definition. Retroactive cover (reprise du passé) is the clause under which the insurer covers faults committed before inception, provided the director was unaware of them; without it, the first policy year is almost empty. The extended reporting period (garantie subséquente) is the period, generally five to ten years, during which a director who has left office remains covered for claims relating to their past mandate.

What will directors insurance never cover?

Exclusions are stable from one insurer to the next. Intentional fault, misuse of corporate assets and criminal fines are uninsurable as a matter of public policy, as are personal benefits improperly received. Bodily injury and property damage fall under other contracts. Claims known before inception are excluded, hence the value of buying before you need it. Finally, an inaccurate questionnaire can void cover.

How much does directors insurance cost in 2026?

The D&O market currently favours buyers: according to Howden's analysis of the French market for 2026, premiums are falling by 3% on average, and by up to 5% for financially sound companies with no claims, driven by the arrival of new insurers and MGAs. For an SME, the price depends on revenue, financial health, sector and international exposure, particularly to the United States.

These ranges are aggregated orders of magnitude from several brokers; a file with recurring losses or US operations will come out at the top end. Contracts generally carry no deductible for individuals, and the premium, paid by the company, is a deductible expense.

Why do your investors require it in the shareholders' agreement?

Because when a fund invests, it almost always appoints one or more board representatives, who in turn become exposed officers or observers. The D&O clause in the shareholders' agreement or closing conditions therefore protects the investor as much as the founders. It frequently sets a minimum limit, in the region of €1 million to €3 million at Series A, and requires cover to be maintained throughout the investment.

It is also what a due diligence checks: the absence of directors insurance, or a limit frozen since seed stage, is among the points raised before closing, as we detailed in our article on insurance audits before a fundraising round.

How do you choose the right limits and avoid underwriting traps?

The limit should be reasoned from potential liabilities, not from the premium. A €1 million to €3 million limit covers the vast majority of claims against SME directors; above €10 million in revenue or with foreign subsidiaries, €3 million to €5 million becomes the norm. Check that subsidiaries and outside mandates are included, and that cover responds from the investigation stage, before any formal claim. Finally, reread the scope of directors' civil liability so that your situation (cross-mandates, de facto director) is properly described in the questionnaire.

Frequently asked questions

Is directors insurance compulsory?

No, no law requires it. It becomes unavoidable as soon as a shareholders' agreement, a financing contract or a board mandate demands it. The risk it covers, however, exists from the first day of the mandate.

Doesn't my company's professional liability policy already protect the director?

No. Professional liability covers the company for damage caused to its clients and third parties. It does not respond when the company, its shareholders, a liquidator or an authority targets the director personally.

Does a director who has left the company remain covered?

Yes, if the contract includes an extended reporting period, generally five to ten years. The liability action is time-barred three years after the harmful event or its discovery, and three years after the liquidation judgment for insufficiency of assets.

How long does it take to buy cover?

For an SME with no reported claims, a short questionnaire, the latest accounts and the list of mandates are enough; a quote can be obtained in a few days. Files with negative equity or US operations require a detailed presentation to the underwriter.

At Lesto, we treat directors insurance as one component of the company's insurance programme: we read your shareholders' agreement, your mandates and your accounts, consult nine insurers on average and calibrate the limit, retroactive cover and extended reporting period to your real exposure. Raising a round, or never reread your policy? Discover our directors liability offer and request an analysis within 72 hours.