A review of the public-company Directors and Officers marketplace: Capacity and competition are back

Author: Dr. Phil Norton

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The Directors and Officers (D&O) insurance market for US public companies finally flattened out by the end of Q1 2022, after some significant challenges in 2020 and 2021. And by the end of Q2 2022, we began to see material decreases in D&O premiums in most sectors, as well as some retention decreases. Driving some of the decreases were additional quotes for primary D&O, as carriers showed more appetite as the year progressed. As we kick off 2023, we're seeing double-digit declines for most renewals, although the size of decreases may abate toward the end of the year.

However, as with any good news, some healthy caution is recommended. We believe that despite lower prices, carriers continue to underwrite public company market D&O insurance carefully, with many concerns to evaluate and take into account.

Some of the current issues carriers consider often include:

  • Heavier emphasis on Environmental, Social and Governance (ESG) issues especially given the anticipated release of the Securities and Exchange Commission's (SEC's) final rules for climate disclosure
  • A deep dive into cybersecurity measures and cyber insurance as they relate to D&O concerns
  • Impact from the pandemic, or any potential threats to ongoing business health or expansion
  • Inflation, which ramped up in 2022, and the potential for recession, which will impact overall costs negatively
  • The remaining backlog of securities claims that could have a higher than average cost

All the above considerations aside, carriers still emphasize to us that the client's risk profile remains the primary variable dictating D&O renewal outcomes. Therefore, expect that the client's market cap and historical pricing levels — as well as the unique industry, loss experience, location, financial health, communication style and other individual account nuances — will continue to have a substantial impact on public company D&O renewals.

For an analysis at the 2022 D&O insurance market and the market's 2023 outlook, read the whitepaper A Review of the Public Company D&O Marketplace: Capacity and Competition Are Back. The whitepaper includes an in-depth look at D&O claims and securities class actions, including the following:

  • Trends in securities class action claims
  • The probability of a D&O class actions claim in the US
  • The number and rate of core securities class actions per year
  • The dismissal rate for core D&O claims
  • The trending types of securities class actions
  • A sample of mega D&O claim settlements in 2022
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