A different outlook: D&O underwriters are putting companies under more scrutiny than in the past.

Most commercial underwriters can probably recall a time when a broker or company official asked for special consideration when requesting coverage, claiming a client or corporation was "different" or even "better" than other companies and therefore, less of an insurance risk.

This happens across almost every industry group and in just about every insurance line of business, including the directors and officers liability arena. The reality for D&O underwriters, probably today more than ever, is they must apply extreme diligence and attention to detail when evaluating these requests.

Recent history tells us there will always be sectors of the economy facing heightened scrutiny from regulators, rating agencies, the press or the plaintiffs bar. In this environment, the key to prudent D&O underwriting is identifying which companies within those industries adhere to high governance and integrity standards.

Currently, D&O insurers are facing an additional challenge. This involves executive compensation and cases in which federal and state regulators are looking at publicly traded companies that may have timed their stock option grants to take advantage of favorable prices.

Recently, we have seen several company restatements and shareholder lawsuits on this matter. At this moment, it appears the issue will be manageable for most D&O insurers. However, it's unclear how many of these situations will result in a claim that triggers a D&O policy. Regardless, some insurers could end up paying significant defense costs in cases where company officers and directors are individually sued or are under formal regulatory inquiry.

As a claims-made policy, D&O insurance responds to a claim at the time it is filed, not when the alleged misdeed was committed. Thus, D&O insurers know that new issues can and will emerge on their watch, no matter how diligent they are.

D&O underwriters are carefully following these options-related matters as they unfold and are generally attempting a balanced, yet prudent, vetting of each company's unique situation. To be sure, they are not returning to business as usual. Underwriters are putting companies under more scrutiny than in the past, and companies should expect more client meetings and more detailed questions at those meetings.

So can a chief executive officer, chief financial officer or even a broker benefit from this additional scrutiny? Absolutely. This is a perfect opportunity for a company to distinguish itself from the pack. The truth is that underwriters often are frustrated by their inability to get the information they need, and may be less willing to accept opaque information on how stock options have been handled or how compensation is granted to executives. Now, prudent D&O underwriters may no longer be in a position to give companies the benefit of the doubt.

Historically, underwriters would review the IO-K and 10-Q forms and proxies seeking stock option and compensation answers. But in reality, there's no single source for the detailed information needed by underwriters to make informed decisions, and certainly no place to read about backdated or news-timed options.

When meeting with a D&O underwriter, officers prepared with complete facts around options grants, accounting treatments and internal controls are more likely today to be rewarded with better pricing and terms. In some cases, their level of transparency will determine whether they even can get D&O insurance from a highly-rated insurer.

Honesty and openness can benefit most companies, even those with a past history of improper actions. For example, a formerly troubled company that demonstrates it has improved its governance practices and has taken appropriate action on questionable behavior will usually be viewed more positively than a similar company that tries to hide or minimize past mistakes.

Any D&O underwriter will review information presented against pre-established criteria. But today, good D&O underwriters also will be guided by their sense of the company's integrity, the information provided and the company representatives they meet. In the end, it will be what a company doesn't-or can't--say, and the details it doesn't provide, that can hurt it most in the D&O marketplace.

Judy Blades, a Best's Review columnist, is senior executive vice president for property/casualty at The Hartford Financial Services Group Inc. She can be reached at [e-mail].