Trend | Range | |
---|---|---|
Overall | Firming to hard and changing rapidly | |
Public company — primary | ![]() |
+17.5% to +50% or higher |
Public company — lower excess layers | Recalibrated to 75%–90% of underlying layer | |
Public company — higher excess layers | Recalibrated to 70%–80% of underlying layer | |
Private and not-for-profit — overall | ![]() |
+5% to +35% |
Financial institutions* — public | ![]() |
+2.5% to +10% |
Financial institutions* — private (other than private equity, which is higher) | ![]() |
+2.5% to +10% |
Side–A/DIC | ![]() |
Flat to +20% |
*See the section on financial institutions — FINEX |
Key takeaway
Firming has continued at an accelerated rate. Most programs can find adequate capacity, but for certain segments and larger programs, willing capacity for new or replacement layers can be sparse.
Increases are the new normal. With the excess recalibration, total program increases may be more substantial.
- Marketplace: With some carriers looking to pull back capacity, building larger towers can prove particularly challenging and require innovative solutions. Additional increases due to the recalibration of excess pricing have compounded primary increases. Insurers are also looking to increase retentions, particularly for public companies.
- Competition: Leading insurers have demonstrated effective discipline and are more conservatively deploying capacity in the face of profitability challenges. London market appetite for D&O (including U.S. publicly traded D&O) has waned. New coverage may be challenging to place.
- Support of incumbent carriers versus marketing: While replacement capacity may not always be available at a less aggressive price, it is often prudent to engage the full marketplace to ensure optimal results.
- Private and not-for-profit companies: An insured's financial health and industry classification matter. Financially distressed firms, companies in volatile or emerging industries and firms that have anti-trust exposures will likely continue to see premium increases, higher retentions and/or coverage restrictions.
- Excess: The high cost of defending claims is putting lower excess D&O insurers in the burn layer. Excess markets are now having success recalibrating increased limits factors (ILFs). Where programs may have seen excess layers with ILFs of 45% to 65% of the underlying layer, we are now seeing those ILFs commonly reset to 75% to 90% of the underlying layer for lower excess and 65% to 80% for higher excess. Each successive increase up the tower leads to much higher total program increases. Any good news? Perhaps. Excess D&O layers that have ILFs in the 80s and 90s likely become the first areas of competition once the marketplace stabilizes. When that happens is TBD.
- Side-A/DIC: Even Side-A (which covers individuals' losses in the absence of indemnification), which historically has remained very competitive, is now seeing some firming.
- Industry: Certain industries (life science/biotech/crypto/cannabis) may see premiums double.
Underwriting discipline may mean more active responses to loss drivers.
- Securities class actions (SCAs): Frequency trends remain at historically high levels. The severity of losses could worsen as relatively higher stock prices could produce precipitous stock drops.
- Cyber, M&A and privacy: Social accountability, social media's impact (e.g., #MeToo), privacy compliance risks and dynamic cyber security risks could put pressure on terms and conditions. Privacy issues are blurring the lines between cyber insurance and D&O insurance, creating D&O insurer concerns.
- IPOs: These risks continue to be much harder to place as insurers monitor the still-unfolding impact of the SCOTUS decision in Cyan, Inc. v. Beaver County; however, as the scarcity of capacity for IPOs pushes rate and terms, there are opportunistic carriers willing to step in — for the right price.
- Coverage: New, broadening features are less likely, and meaningful improvements may come, again at a price. Areas of focus are likely to include investigation coverage, social media, crisis and reputation protection, #MeToo-related and Side-A DIC enhancements.
Related content tags, list of links
Survey Report
Financial, Executive and Professional Risks (FINEX)
Insurance
United States