Companies should take an intense look at their compensationpractices using stock options in light of a recent ruling by theSecurities and Exchange Commission, an insurance brokerage iscautioning.

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Nick Conca, managing principal of New York-based Integroinsurance brokerage, said in an interview, "Companies must now bediligent in undertaking a thorough review of their corporatepolicies."

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He noted that internal investigative procedures "must now takepriority. Oversight committees should now be formed and independentexperts called in to assess corporate policy in light of existingD&O [directors and officers liability] policy coverage."

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On Wednesday the Securities and Exchange Commission laid outrequirements for companies on how to disclose their stock optiongrants.

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While the new rules won't necessarily bar the practice ofback-dating options to ensure their dollar value to those grantedthem, it will require companies to disclose the manner in whichthey are granted more fully than before, Mr. Conca noted.

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D&O writers are now going to be more aggressive in theirunderwriting of executive liability risk. "As such, companieslooking to renew or expand their D&O liability coverage willneed to be particularly sensitive to the terms and conditions giventhe SEC requirements," Mr. Conca said.

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An estimated 80 companies have been targetted in various federaland state investigations regarding the practice of back-datingoptions to improve their cash in value. Companies face thepossibility of not only governmental fines and sanctions but alsoprivate shareholder litigation.

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D&O writers will in all likelihood be on the hook fordefense costs, but disagreement exists as to whether they will beexposed for "disgorgement of ill-gotten gains" costs.

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Chubb Chief Administrative Officer John Degnan said in a recentconference that the entire back-dating issue has beenoverblown.

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Mr. Conca said he does not see the back-dating issue as leadingto a noticeable impact on D&O pricing or terms andconditions.

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