The cost of insuring British directors has more than doubled in the last year due to concerns about corporate governance and pandemic claims, leading to fears that smaller businesses are struggling to shoulder the burden. 

Government officials are in talks with insurance executives about the soaring costs, while business leaders and ministers have also raised concerns, the Financial Times reported. 

Meanwhile mooted new regulations that would make directors liable for errors in firms’ accounts would send insurance costs even higher, according to executives. 

It comes after business leaders slammed the government's plan to impose fines and bans on directors for accounting inaccuracies, with industry leaders warning that such a move would undermine the Government’s ambitions to make the UK a global leader in technology.

Last week, Sir Martin Sorrell, founder of advertising firm S4 Capital, said the proposals would "strangle initiative" at companies trying to survive the pandemic.

The move follows three independent reviews and growing calls for an overhaul after a string of financial scandals at Patisserie Valerie and Carillion. The Government's plans are due to be unveiled as early as this week. 

But business leaders are already concerned about the rising cost of directors and officers liability insurance, which is used to protect managers from claims and prosecutions made against them personally while acting in their role. 

Bosses have said insurers are hiking up prices given an expected wave of pandemic-related claims.

Jonathan Geldart, head of the Institute of Directors, wrote to business secretary Kwasi Kwarteng, warning that insurance costs were "having a profound effect on some smaller businesses". He added: "Cost increases put yet more pressure on businesses and entrepreneurs at a time when, for many, cash flow remains fragile."

Mr Kwarteng told the IoD that he was also concerned and that the Government was in "continual dialogue with the insurance sector regarding its response to this unprecedented situation", the FT reported.

The Treasury said it was engaging with the industry "to understand what factors are affecting the availability, or increased premium price, of cover across sectors".