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One simple policy that might save your entire company

There are increasing trend of losses in the directors’ and officers’ liability market. In accordance with the American insurer, AIG, their 2018 fourth quarter loss was not because of the natural catastrophes claims that we have seem in the news but D&O claims. Re Insurer Transatlantic Re estimated there might be around USD6bn D&O claim reserves currently.

What does this mean for the world of D&O insurance?



Narrative:

1. The potential client base become smaller not because of the pick up rate but due to companies being taken private (see orange line)


2. Premiums have been reducing as more underwriters (especially in the Asian market) pursue the relative attractiveness of D&O (purple line)


3. The number of class actions have been steadily increasing in both frequency and severity (green line). – For US



We can, therefore, identified in the marketplace that need to be managed:


· Pricing: Both Primary and Excess D&O insurance policies rates are increasing even on clean accounts – Nil claim account


· Capacity: Insurers are becoming much more cautious about managing their limit profiles and restraining the capacity they are prepared to deploy on each risk. In Hong Kong, there are a frequency trend of SFC investigations


· Increased limit factor: Excess layers are no longer strictly following a percentage cost of underlying layers (some pay the same or more than underlying)


· Private company D&O: there are different loss factors beginning to manifest and this is partly because D&O tends to be bundled with other lines such as EPL, crime and fiduciary. The challenge is that the component parts have also been under-priced.


We are here to help you navigate this changing and challenging insurance market!

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