Company directors risk being left personally liable for failings in their response to coronavirus as insurers raise prices and impose new restrictions on cover ahead of this week's policy renewal season.
Sources said some insurers have ratcheted up premiums on directors' and officers' (D&O) insurance by as much as 400pc compared with last year as they face a wave of coronavirus claims and battle to repair balance sheets damaged by falling markets.
Companies buy D&O insurance to protect their directors against claims brought by regulators, shareholders or creditors over negligence or wrongdoing, including if the company goes insolvent.
With firms expected to go bust due to the sudden economic crisis sparked by coronavirus, directors are watching their cover closely ahead of April 1 - a major renewal date for commercial insurance.
Garbhan Shanks, an insurance lawyer at Michelmores, said D&O premiums were "already shooting up" before coronavirus, but some companies were now struggling to get the cover they want because insurers are increasing prices as much as four-fold on last year.
Bruce Hepburn, chief executive of Mactavish, an insurance consultancy representing policy buyers, said that as well as raising prices, insurers were introducing new exclusions to avoid covering losses arising from Covid-19.
He said the exclusions posed a major problem for companies renewing their cover because D&O insurance works on a "claims made" basis.
The Association of British Insurers said last week that "to routinely insure against a pandemic of this scale would be unaffordable for most businesses".
Defending the use of exclusions by insurers, Bruce Carnegie-Brown, chairman of the Lloyd's of London insurance market, said: "Everybody is keen to increase the clarity to the extent that there is doubt about whether things are covered or not."