July 19, 2022

D&O Insurance: Premium Outlook Brightens

After several years of increasingly bad news when it comes to D&O premiums, a recent NACD blog post by Marsh’s US D&O Product Lead Matthew McLellan says that things are looking up for companies looking to purchase coverage.  Here’s the intro:

For the first time in four years, it is likely that an increasing number of public companies will, on average, experience a year-over-year decrease in their US directors’ and officers’ liability (D&O) insurance premiums in the second half of 2022. Material premium increases have become increasingly rare, and there is a dramatic return to competition in the marketplace as insurers look for new sources of revenue.

Despite a return to competition, the underwriting community remains focused on several risk areas including legal and regulatory trends; activist investors; environmental, social, and governance (ESG) issues; and other challenges that could lead to litigation. Companies should optimize opportunities, but also remain vigilant in their renewal preparations, and work with their brokers to carry out comprehensive reviews of policies and obtain the broadest coverage possible.

The blog goes on to discuss the risks that companies and insurers are confronting, which include stock market volatility, supply chain issues, inflation, heightened cyber threats, continuing high levels of shareholder litigation, and SEC proposals on climate & cybersecurity disclosure are likely to prompt greater regulatory scrutiny. In an environment where risks are increasing but premiums are at least temporarily easing, the blog suggests that companies should focus on optimizing the structure and coverage amounts provided by their D&O insurance programs.

John Jenkins