Insurers Raise Rates for Board Members of Chinese Companies

Stephen Markscheid holds one of the riskiest jobs in the world, or so say insurers. The Mandarin-speaking American sits on the boards of JinkoSolar Holding and four other Chinese companies that trade on U.S. exchanges. Over the past two years a rash of accounting scandals has hammered the stocks of the roughly 500 Chinese companies listed in the U.S. and sparked shareholder lawsuits. The Securities and Exchange Commission has revoked the registrations of more than 50 Chinese companies since early 2011. “The work that I’m doing now, it’s not for the faint of heart,” says Markscheid, who travels to China for board meetings from his home in Wilmette, Ill., eight to 10 times a year. “I’ve been sued quite a few times.”

As a result, the cost of insurance covering directors and officers of Chinese companies against lawsuits has skyrocketed, with annual premiums reaching as high as $100,000 per $1 million of coverage in some cases, up from a range of $10,000 to $15,000 a few years ago. Buyers of the coverage are “really getting socked,” says Brendan Dolan, a senior vice president at Willis Group Holdings’ North America unit, who has brokered policies for Chinese companies since 2005. Insurers are “being opportunistic, because they know they can,” he says.