Many companies in the UK will have insufficient insurance cover because of new legislation such as the Employment Relations Act 1999, warns a leading underwriter.

Ian West, financial risks underwriter at R.E. Brown, said traditional corporate liability policies, such as employers' liability insurance, will address only some key aspects of the liability that a company has to its staff.

But West adds: "In the modern business climate it is crucial that companies protect themselves against the consequences of the new employment legislation – not to say, health and safety and regulatory legislation".

"Indeed, if the company is exposed to the legal environment in other parts of the world besides Europe, then the liability it faces can grow exponentially".

West says management should consider buying a stand-alone company liability insurance policy.

But he warns against buying so-called entity extensions which broaden the cover of a "directors and officers'' policy.

He adds: "This approach affords protection against some of the consequences of the rising tide of corporate legislation, without inherent issues that can apply with entity extensions."