Reinsurance News

D&O remains challenging for pricing and capacity: Amwins

4th April 2022 - Author: Katie Baker

According to specialty insurance broker Amwins, the Directors and Officers (D&O) market remains in a holding pattern with 5% to 10% price increases as the world continues to experience economic uncertainty in the aftermath of the pandemic.

AMWINSThe D&O market for Initial Public Offerings (IPO) and Special Purpose Acquisition Companies (SPAC) remains challenging in both pricing and capacity, the overall market predictions for public and private D&O insurance are cautiously optimistic as we head into the second and third quarters of 2022.

The initial concerns about high volumes of company bankruptcies and/or security claims following COVID-19 have not materialised, and while inflation is a known concern, its impact on the economy is yet unknown, the broker says.

This has resulted in insurers and underwriters taking a more individualised approach to pricing and conditions of D&O policies.

The general economic factors at play include the evolving regulatory environment and claims litigation, trends in cybersecurity, and concerns related to employment and management liability, but a company’s industry subset and unique business operations activities are what’s driving the underwriting decisions on renewals.

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Retail agents and brokers looking to obtain the most favourable prices and terms for their insureds should begin the renewal process early to evaluate client exposures related to both general market factors and unique operations.

The Securities and Exchange Commission (SEC) enforcement activity against publicly traded companies and their subsidiaries declined in 2021, which was not unexpected considering the change in administration.

Amwins expects the activity to resume in 2022, and while the SEC has signalled to investors and the marketplace that it will focus on SPACs and related regulation, that is not the only area likely to face scrutiny.

As cyber losses related to ransomware, social engineering and privacy breaches continue, cyber security controls and disclosures remain an important part of the D&O market.

Currently, company cyber security is often viewed as a board responsibility not only as it relates to mitigating risk with security controls, but also as it relates to business continuity planning in the event of a breach.

Even with separate cyber coverage, D&O claims related to cyber are expected to increase in 2022, particularly for financial institutions where social engineering vulnerabilities continue to create costly exposures.

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