Directors’ and Officers’ (D&O) Insurance shows sign of stabilisation in 2022

Thankfully, we can see the market is now showing signs of stabilisation as insurers look to compete on programmes that have seen their premiums inflated even prior to the pandemic. New capacity entering the market throughout 2021 has also intensified competition, further leading to some significant rate reductions at the beginning of 2022.

Our D&O insurance market predictions for 2022;

• POSITIVE COMPETITION WILL CONTINUE. New underwriters will continue to enter the D&O liability market and expand appetites whilst driving positive competition. Traditional D&O underwriters will want to remain attractive, competing with these new entrants and are likely to offer clients more choice and flexibility in this challenging market.
• BROKER ADVOCACY WILL CONTINUE TO INFLUENCE RATE STABILITY. Clients are becoming more aware of the value an insurance broker can add during hard marketing conditions. Presenting the risk professionally to the market has and will continue to result in favourable terms and premiums for D&O programmes.
• AN EVOLVING RISK LANDSCAPE. The commercial landscape has changed and we predict that new issues such as emerging risks including cyber-related D&O claims and ESG and will attract greater insurer interest.
• A POLISHED RISK PROFILE - Organisations are becoming increasingly aware that if they invest time and effort at senior executive level in differentiating their risk profiles they may secure favourable renewal terms from the D&O market.

Whilst we do not expect pricing to return to soft market levels any time soon, reductions are a welcome sign for many of our clients, for whom Gallagher has been able to negotiate favourable rates successfully.

It’s also worth remembering that this period of stabilisation may not always be smooth sailing for the D&O market given it is a long-tail class of business, but we’re optimistic that the remainder of the year will be a period of further positive adjustment.

Case study

In Q4 2021, Gallagher worked with a large UK-based listed technology and retail company. Despite the company growing quickly over the preceding 12 months surrounded by hard market conditions, Gallagher tenaciously marketed their risk and managed to save them nearly £100,000 in premium, whilst also getting them an extra £20 million of limit.

The client benefitted from a Gallagher risk assessment report, which helped them demonstrate their improved corporate governance and risk management framework to insurers.

CONDITIONS AND LIMITATIONS
This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein.. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to the fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher.

The information provided is offered as insurance industry guidance and provided as an overview of current market risks and available coverages and is intended for discussion purposes only. This publication is not intended to offer legal advice or client-specific risk management advice. Any description of insurance coverages is not meant to interpret specific coverages that your company may already have in place or that may be generally available. General insurance descriptions provided do not include complete insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis.