A FTSE SMALL CAP Group General Counsel & Company Secretary writes...
“We are being advised that we should expect a significant increase (of c. 100%) in insurance premiums to renew our directors & officers liability policy and that this is due to market conditions rather than any assessment of risks specific to our business. Is this the experience of other companies?”
We have a March renewal date and have seen D&O premiums double at each of the last two renewals, admittedly from a pretty low base. The reasons given by brokers echo what other posts are saying about a real hardening of the market due to increased size and number of claims hitting the insurers across the peice.
Same here, we renewed at exceedingly more than usual. The advice prior to renewal was that market conditions had worsened, with increases of 200-300% reported as being the norm due to the highly volatile claims environment and concerns over US litigation (which as you know is markedly more expensive than other jurisdictions).
I believe other comments have covered this but my insurance manager has kindly provided me with the following in relation to the hardening market, which hopefully is helpful:
“In summary, the market is hardening:
• There is less capacity in the market with less insurers offering cover and therefore less competition
• Insurers are issuing more restrictive policy conditions
• Increase in regulation creates more potential exposure under the D&O policy
• Increase in significant claims and losses in the market
• Increase in premiums – Average increase in the region of 50% for non-US traded insureds, subject to no claims
• Covid-19 is having an impact and is the reason for the specific Covid-19 questionnaire we have been asked to complete for our renewal is so insurers can try and rate their potential exposure
The market was hardening last year and we structured our programme to reduce any premium increase however we still saw our premiums rise from by 59% even with no claims. Insurers are looking to spread the pain across the whole market and our premiums will undoubtedly go up this year, but by how much is a wait and see.”
NB We are currently completing our D&O proposal form to submit to our broker.
Glas Cymru (Welsh Water) is limited by Guarantee and is not a listed entity, nor has it been, but that was the only option in Company Type. That said we behave like a listed company and comply with the UK Corporate Governance Code, which is a requirement under our licence with Ofwat.
We noticed an increase of around 40% in our D&O insurance. We were told the premium increase was more of a reflection of the overall ‘hardening’ insurance market (and the directors and officers liability insurance market in particular) rather than the the Company risk.
Directors and officers liability insurers are experiencing an increase in claims frequency and the increasing legal costs associated with such claims.
This year we marketed the policy to several alternative insurers however unfortunately they were unable to provide terms that were more competitive than AIG’s who we went with (albeit with a c50% increase).
We have had the same guidance from Marsh that premium increases are anything from 30 to 200% even with no claims. We are also in a lower risk sector but saw a 100%+ increase in our premiums at the last renewal from c £65k to c£140k. We have also been advised by Marsh that some insurers are pulling out of the D&O market and potentially trying to reduce cover. We are anticipating needing to do a fairly detailed presentation to the market ahead of our renewal on the financial performance of the Group and the impact of COVID and the recession ahead of our renewal on 1 December.
Yes, our brokers were also warning against this, in fact potentially as much as 200% increase. There is appetite out there but the brokers need to push hard against this. They have also needed further information from the company on whether there are covenant waivers in place, equity raises etc..
Yes … our broker ( Marsh) has given us similar warnings of further increases in premium for our next renewal. We are a 1 October renewal and saw a substantial increase in premium last year. We have no claims and are relatively low risk (not financial services and in good financial standing with an unexciting corporate risk profile from a D&O perspective). Marsh is usually good at resisting increases for us … but not on this policy last year. I think you will just have to suck it up!
From my experience, the cost of renewals this year is largely market driven and I would expect nearly all renewals to prove challenging. The Insurance Market was/is undergoing a period of significant change due to the poor financial performance of a large number of its participants . The poor financial performance has been systemic affecting participants of all sizes. For most insurers the greatest challenges have arisen with regards to “long-tail” liability classes of insurance (Directors and Officers, PI, Crime, General Liability etc.) were rates are seen as massively under-priced and the frequency and value of claims increasing greatly. With regard to the Financial Lines market itself, the past 12 months has also seen a reduction in available capacity with a number of participants vacating the space. The contraction of capacity, reduction in available reinsurance capacity in the Financial Lines space and the interventionist moves from Lloyds of London have combined to ensure that all market participants are carrying out strenuous reviews of their portfolios.
Yes. We are hearing the same. Marsh, Our brokers have provided information on how the D&O market has changed over the last few years. FTSE 250 business experienced the largest increase in D&O premiums in 2019. The increases accelerated in the second half of 2019 and show no signs of slowing in 2020. Apparently,, it’s due to an increase in the frequency and severity of claims and the reducing capacity with the insurance market to underwrite this line of insurance. I’m expecting an increase of between 70% and 100% at our 2020 renewal in November.
Yes our D&O premium has always been relatively low as have never ever had a claim. However, for our upcoming renewal 1 July this will triple.