Uncertainty looms over D&O liability market

09 August 2017

The directors’ and officers’ liability (D&O) insurance market is at a point of uncertainty unlike anything seen since the financial crisis for those in the banking sector or 2001 for the tech companies following the dot.com bubble bursting in 2000.

Recently we saw the first insurer withdrawal of note from the financial lines insurance classes in the past five years, with the insurer citing unsustainability and lack of profitability. 

While we are not forecasting this to be the first in a line of withdrawals, it is an indicator that greater scrutiny needs to be placed on future programme planning and counterparty scrutiny.

At the same time, sector/ geography specific claims trends that previously would have been weathered by the market have begun to result in changes to terms and conditions. 

Where this is relevant to clients of JLT, we are giving fair warning as early as possible to allow for longer-term budgeting.

Aggressive re-marketing efforts can still produce savings. However the returns are diminishing and the sacrifice of continuity of insurer is a concept to be treated carefully.

Finally, there were over 120 US securities class actions brought in Q1 2017. Taken on an annualised basis, this would make 2017 the record year for claims of this nature and would eclipse levels seen in 2001.

Tips for buyers

Look carefully at your budget for D&O insurance. Consider whether the quality of coverage and counterparty is more crucial than the price tag. 

Your policy is more likely than in the past to suffer claims; how comfortable are you with the insurer you have selected?

For further information, please contact Kurt Rothmann, Head of Management Liability on +44 (0)20 7528 4961 or email kurt_rothmann@jltgroup.com