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U.S D&O liability underwriting results lowest in seven years: Fitch

4th May 2018 - Author: Matt Sheehan

Fitch Ratings has reported that U.S Director and Officers (D&O) liability re/insurance underwriting results for 2017 fell to their worst level since 2011.

Fitch RatingsD&O has historically been a more volatile product line than many other Property and Casualty (P&C) products, and claims risk in private and non-profit organisations has expanded in recent years, according to Fitch.

Additionally, emerging risk areas like cyber and employment practices were found to be a significant concern for future D&O exposures.

Industry aggregate data also revealed that annual direct premium volume was flat again in 2017, at approximately $6.4 billion, and unyielding market competition has left market premiums virtually unaltered for four consecutive years.

Jim Auden, Managing Director at Fitch Ratings, said: “Some larger D&O insurers are seeing higher segment loss ratios, in part, due to the surge in federal class action suits filed last year.”

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However, D&O underwriters also tend to be larger, multi-line re/insurers capable of absorbing potential large losses with results from other segments.

Accordingly, Auden added: “The likelihood of D&O segment risks individually driving insurer ratings are limited outside of extreme crisis periods and events.”

There is also likely to be greater demand for D&O coverage in the future as risks of greater personal liability from various D&O-related claims prompt senior management and directors to seek further protection.

Moreover, recent D&O pricing trends remain flat despite poorer underwriting performance, and are unlikely to shift without further weakness in performance and a visible retreat of marginal underwriting capacity in the D&O space.

Fitch also found the rankings of top underwriters in D&O to remain unchanged, with AIG accounting for 14.3% of industry direct premiums, Chubb for 12.2%, and XL Group for 10.3%.

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