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Survey Report

Insurance Marketplace Realities 2020 Spring update – Directors and officers liability

Financial, Executive and Professional Risks (FINEX)
COVID 19 Coronavirus

May 7, 2020

Underwriters are laser-focused on liquidity, industry and disclosures specific to COVID-19.
Rate predictions
  Trend Range
Stable risk profiles (modest COVID-19 exposure)
Public company — primary
Increase (Purple triangle pointing up) +15% to +50% or higher
Public company – excess layers
Increase (Purple triangle pointing up) +25% to +75%
Private and not-for-profit — overall
Increase (Purple triangle pointing up) +7.5% to +50% or higher
Increase (Purple triangle pointing up) +5% to +20% or higher
Challenged risk profiles
High COVID-19 exposure
Case-by-case basis; large potential increases
Challenged industries, e.g., oil
Case-by-case basis; large potential increases

Our D&O rate predictions assume heightened financial pressure, but no fundamental breakdown in our economy as a result of COVID-19. The COVID-19 impacted business environment could rapidly turn worse — in which case pricing could be much higher and capacity inadequate.

Key takeaway

Underwriters are laser-focused on (1) liquidity, (2) industry and (3) disclosures specific to COVID-19.

The COVID-19 environment is applying more pressure to an already firming D&O marketplace.

  • Unprecedented environment: The global economy is experiencing unprecedented challenges as a result of the COVID-19 pandemic.
  • Industry: Certain segments, such as insurance companies (particularly life), airlines, life science, biotech, real estate, oil and gas, hospitality, travel and retail are seeing heightened pressure. Capacity is becoming harder to find to complete some programs.

Renewals are challenging, with the COVID-19 environment heightening underwriting scrutiny of D&O exposures — all in addition to the continued firming of primary and excess rates.

  • Marketplace: Amid the considerable challenges, we see some good news: very few knee-jerk reactions among North American carriers. The London market seems notably harder, with triple-digit increases becoming more common. In many cases, our pre-COVID-19 rate increase projections are holding up.
  • Capacity: Even before COVID-19, some carriers had signaled their intent to limit company-specific D&O exposure by reducing capacity and/or layer size. Today’s D&O insurance buyers with larger towers will likely find renewing towers challenging. Replacement capacity may be hard to find and may require innovative solutions. Targeted segments may face a hard market — reduced or pulled capacity, increased retentions — especially on private D&O.
  • Underwriting: Insurers are more focused on exposure to the consequences of the COVID-19 environment. More specifically, carriers are looking at liquidity/solvency, guidance and disclosures, revenue disruption, supply chain and logistical concerns, and changes to business plans. Underwriter questionnaires or question lists are providing some consistency. Carriers are looking to increase retentions and decrease limits — particularly for challenged classes. Generally, they have not pulled quoted or bound terms, but we have seen this happen in extreme circumstances.
  • Terms: We have seen little in the way of blanket COVID-19 exclusions in D&O in North America, but we have seen one-off attempts based on the particulars of a given risk. Alternatively, we are seeing liquidity-challenged accounts being asked to accept bankruptcy/insolvency/creditor exclusions or sublimits.
  • Will pricing history matter? Pricing history is likely to be a factor in pricing this year, but in this environment, even accounts that had experienced increases in 2018 and 2019 may see more of the same in 2020.
  • Excess recalibration continues: In the second half of last year, we began seeing underwriters effectively recalibrate how they priced excess relative to underlying layers. That trend often resulted in insurance tower prices increasing even more than the primary pricing, and we expect that to continue through the rest of the year.
  • Competition: Some insurers have demonstrated effective discipline and are more conservatively deploying capacity in the face of profitability challenges. The U.K. 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 it may be prudent to engage the full marketplace to ensure optimal results and validate incumbent terms, replacement capacity may be hard to find at any price.
  • Bankruptcy/insolvency: Between COVID-19 economy shut-downs and unsustainable oil prices, the current environment could result in waves of bankruptcies. The plaintiffs’ bar and regulators have demonstrated proficiency in pursuing claims against directors and officers within (or apart) from bankruptcy proceedings. For companies facing restructuring or bankruptcy, D&O coverage is especially valuable. Insureds should make sure to seek expert advice in advance of any filing.
  • Side-A/DIC (non-indemnified loss): Even Side-A, which historically has remained price competitive, is seeing some firming. With heightened bankruptcy risk and a possible mega-derivative settlement trend developing, Side-A pricing pressure could pick up in this firming market.
  • Private and not-for-profit companies: An insured’s financial health and industry classification matter now more than ever. Financially distressed firms, companies in challenged or emerging industries, and firms that have antitrust exposures will likely continue to see premium increases, higher retentions and/or coverage restrictions. Large private companies and portfolio companies of private equity firms may see greater underwriting scrutiny and pressure this year.
  • Securities class actions (SCAs): Frequency trends remain at historically high levels. The severity of losses could worsen as we see precipitous stock drops from record highs. Nevertheless, we are not expecting COVID-19 to produce a wave of new SCAs.
  • 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. Risks may be heightened by the degree to which businesses have shifted to remote workforces in response to COVID-19.
  • IPOs: Expect high retentions, hard-market pricing and conservative terms to continue for the foreseeable future.


Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. COVID-19 is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

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