For Mr Neubürger the incident is not entirely over. Criminal proceedings against him were closed after he agreed to pay a fine, but a civil case of Siemens against Mr Neubürger is still running.

“A D&O policy is not enough to protect the manager. A more comprehensive coverage is needed,” said Mr Neubürger. He regards an additional policy covering criminal proceedings against the manager as a necessity. Protective insurance like D&O and criminal law cover must be fixed in a manager’s contract, he said.

“Normally neither the executive nor the supervisory board members have an enforceable right to get a D&O policy if this had not been fixed in a contract,” added Mr Neubürger.

Furthermore, the company should have a duty to release relevant information when a manager is accused of corruption or breach of duty of care, he continued. “How can a board member prove he is innocent, when the company denies him the necessary documents?” asked Mr Neubürger.

In addition he demands that managers should get compensation from the company if they are proven innocent. “When a manager’s job prospects have been blocked for years due to long proceedings he should have a right to compensation,” he said.

In Anglo-Saxon countries managers are far better protected. “In this respect Germany is a developing country,” said Mr Neubürger.

Oliver Sieg, from the law office Noerr LLP, confirmed that the risk of board members being sued in Germany by their companies due to neglect of duties has increased considerably. “There is no country in Europe where companies battle so often and for such high sums with their managers than Germany,” he said. He named the UK as a ‘paradise for board members’ compared with Germany.

Germany’s highest court has decided that companies should be forced to pursue claims they may have against their managers. However, Mr Sieg believes that the high level of litigation in the country is also due to the level of D&O cover in Germany. “This naturally arouses desires,” he said.

In most cases the companies’ calculations do not work out. “It is absurd to think one message to the D&O insurer is enough to get €10m. Claims settlement is often a hard battle with lots of casualties,” said Mr Sieg. Often the companies spend more money on court fees and lawyers than they get back from D&O insurers.

Some legal expense insurers have started to offer policies that cover the legal expenses of companies suing their D&O insurer because it refuses to pay claims. However, it is unclear whether companies really need this. “Until now there had been only a few lawsuits against D&O insurers due to refusal of coverage,” said Mr Sieg. In most cases company and insurer reached a settlement without the need for such litigation.

However, Michael Hendricks, Managing Director of broker Hendricks & Co, believes that it might be useful to have such a policy nevertheless. “When there are difficulties in claims handling, we send the confirmation of the legal expenses insurer for the cover to the D&O insurer. This helps to achieve reasonable settlements,” he said. Hendricks is owned by the British insurer Hyperion.

Despite the numerous claims in the German D&O market the price war among insurers continues, observed Mr Hendricks. “It is a cut throat competition. The premiums are pushed into free fall,” he said. Some insurers now offer a basic D&O cover for €50,000 that would have been priced at €200,000 a couple of years ago, he said.

Leading the reductions are the insurers Chartis, HDI-Gerling and Zurich, while market leader Allianz is more cautious, said Mr Hendricks. In addition, new players have entered the market. Insurers like XL, QBE, Liberty, Torus and HCC that have, until now, mostly acted as excess carriers in higher layers increasingly provide basic cover, he added.

“If prices had remained stable in 2003, the German market would now have premium income of €1.5bn annually rather than €500m,” he said.

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