Reinsurance News

COVID-19 increasing rate pressure for D&O Buyers: Marsh JLT Specialty

30th June 2020 - Author: Charlie Wood

Since 2019, pricing for directors & officers liability insurance for public companies has increased by double digits and, as a result of the COVID-19 pandemic, that pace of change is now accelerating.

According to analysts at Marsh JLT Specialty, while the ongoing pandemic is currently a top priority and concern for organizations and insurers, its full impact on D&O pricing remains to be seen.

In addition, other trends are further complicating market conditions, driving a persistent deterioration of loss activity and prompting insurers to further increase rates as they seek a return to profitability.

Analysts note that in the first quarter of 2020, total program pricing for public companies increased 44%, while primary rates increased 26%.

Total pricing increased for 95% of Marsh clients renewing their D&O insurance programs in the first quarter; primary pricing increased for 89% of clients.

Marsh expects to see rate increases continue to accelerate at least through the third quarter of 2020, and is closely monitoring market trends on a monthly basis.

Insurers, however, have made clear to buyers that these trends do not reflect a short-term restoration or correction of price increases.

Insurers have suggested that current conditions will persist for several years, with the COVID-19 pandemic only adding to already worsening conditions.

Analysts add that, although COVID-19 exclusions are not widespread to date, some insurers are introducing insolvency exclusions and in some circumstances are requiring that buyers sign warranty letters.

Several D&O lawsuits related to the pandemic have already been filed, including both securities class actions and shareholder derivative actions.

Insurers are bracing for more litigation in the coming months, which could continue to affect pricing as well as terms and conditions.

While capacity remains stable, insurers are judiciously managing it and taking tougher positions on policy language and claims.

Substantial price increases, meanwhile, have prompted some companies to restructure their programs, including purchasing lower limits.

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