Vietnam - Emerging D&O Trends Presentation - AIG

South East Asia & China Regions

Financial Lines Division

Vietnam – Directors & Officers Liability

Emerging D&O Trends in Asia

AIG S E Asia Pte Limited, Financial Lines Division

Presentation Outline

Driving the need for D&O in Asia

Claims Examples in Asia-Pacific

Corporate Governance Survey in Vietnam

The Corporate Governance Framework

Conclusion

Introduction


Southeast Asia & Greater China

The next ‘big thing’

Globalisation is at work - creating wealth at a pace unseen since the industrial revolution

Investors view of Asia



Why the Underlying need for D&O in Asia?




Conclusion


Foreign Direct Investment Inflows –2005 – USD bn

0 100 200 300 400 500

Africa

Latin

America

North

America

Asia

Europe

Economist – 19th October, 2006

% Change from 2004

99.2

27.4

7.5

3.1

78.3

Source: UNCTAD


SE Asian Stock Markets at record highs

Source: SGX Annual Report

2006

Singapore Stock Exchange

58.1

138.898.4

159

318.8

0

50

100

150

200

250

300

350

Avera

ge IPO m

ark

et capitalization

FY2002 FY2006FY2005FY2004FY2003


A Change in the Legal landscape

� Greater economic growth =

� Changes in the legal

framework and

� Higher regulatory standards

Is driving greater expectationfor Corporate Governance Best Practice


With Wealth comes Responsibility

Asian regulators are

MORE active and are

focusing on:

improving standards of

disclosure

financial reporting

board practices

“Negative assurance”


Regulators & Legal Reforms powering actions against Directors & Companies

Recent Legislative Reform Impacting Asia

� Enterprise Law – Vietnam, 2006

� Competition Legislation – Singapore,

2006

� China Bankruptcy Law – China, 2006

� ‘Strict Liability’ Regime – Taiwan,

2006


Investor Interest in Asian Companies is Global - US (ADR) Trading Volumes


How the Corporate Landscape quickly changes ….

"Business, in many cases, will descend to the lowest common denominator. And if we believe that the market depends upon integrity and fair dealing, then government must step in to make sure that the rules are honored”.

Former NY State Attorney

General - Mr Elliot Spitzer



The Underlying need for D&O in Asia




Conclusion


“The Ripple Effect” in Southeast Asia

0

10

20

30

40

50

60

70

80

90

100

D&O

2003

2004

20052006D&

O Claims no

tifica

tions

are

increa

sing


AIG’s SEA Claims Experiences

A 56% increase in the contribution of Regulatory Claims

2006

Reg/Gov't

Body

25%Employee

23%

Misc

14%3rd Party

36%

Shareholder

2%

2005

Employee

20%

Misc

8%

3rd Party

53%

Reg/Gov't Body

16%

Shareholder

3%


AIG Claims Example - Investigation

A large Asian telecommunication company held a business conference in Hawaii

Subpoenas served requiring key executives to testify before the Grand Jury of the US District Court in Hawaii

Investigation initiated by the US Federal Communication Commission (FCC) in relation to possible violation of anti-trust law

+ USD 4Million in legal costs incurred


AIG Claims Example - Fraud

The Chairman of a HK Listed Chinese company was arrested and detained as a result of allegedly improper bank loans and property transactions

Additionally two of the company’s directors were also arrested and charged by the ICAC in Hong Kong for ‘improper activities’

Legal defence costs were incurred


AIG Claims Example - Shareholder

A Bank in the Middle-East was placed into liquidation

Regulator conducted an Investigation

A class-action was filed by shareholders

The Loss exceeded USD 10Million


AIG Claims Example – Employee Whistle-blowing

An employee complaint triggered an investigation

Criminal proceedings initiated against former D&O’s

Allegations also levelled against some current directors

Defence costs exceeded USD 6Million







Conclusion


Corporate Governance Findings in Vietnam

Lack of transparency and disclosure

Weak Internal Controls

Lack of understanding as to shareholder rights

Specific Challenges facing State Owned Enterprises (SOE’s)

‘Corporate Governance in Vietnam: The Beginning of a Long Journey’ –International Finance Corporation (IFC); and Mekong Private Sector Development Facility (MPSDF), 2006







Conclusion


Corporate Governance Framework in Vietnam

Can breaches of duties owed by members of the board generate individual:

Civil liability? �

Criminal liability? �


Corporate Governance Framework in Vietnam

Does Vietnamese law or regulation provide for:

Individual shareholder suits against the board and

management? �

Class action suits against the board and

management? �

Derivative suits against the board and management�







Conclusion


Conclusion – D&O Trends in Asia

Competition between countries for investment

Progressive legislative reform

Greater regulatory interest in business affairs

Greater consumer awareness and litigation

Improved Corporate Governance practices


THE DATA CONTAINED IN THIS PRESENTATION ARE FOR GENERAL INFORMATIONAL PURPOSES ONLY. THE ADVICE OF A PROFESSIONAL INSURANCE

BROKER AND COUNSEL SHOULD ALWAYS BE OBTAINED BEFORE PURCHASING ANY INSURANCE PRODUCT OR SERVICE. THE INFORMATION

CONTAINED HEREIN HAS BEEN COMPILED FROM SOURCES BELIEVED TO BE RELIABLE. NO WARRANTY, GUARANTEE, OR REPRESENTATION, EITHER

EXPRESSED OR IMPLIED, IS MADE AS TO THE CORRECTNESS OR SUFFICIENCY OF ANY REPRESENTATION CONTAINED HEREIN. Copyright © 2007.

THANK YOU

AIG Vietnam

Vietnam - Emerging D&O Trends Presentation - AIG

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