D&O rates continue to fall, coverage expands

Directors and officers liability insurance buyers saw rates fall further during midyear renewals as insurers offered broader coverage while competing for business, experts say.

Most policyholders saw mid-single-digit to low double-digit decreases, brokers and insurers say.

Companies that had not experienced a loss saw rate decreases between 7% and 10%, said Andrew Doherty, a New York-based partner and practice leader of executive and professional risk solutions at USI Insurance Services LLC. Companies with recently paid or pending claims or that underperformed financially saw flat renewals, he said.

Because D&O claims are relatively infrequent, many policyholders are benefiting from the competitive environment, he said.

San Francisco-based Rachel Miller, vice president for management liability at Woodruff Sawyer & Co. Inc., said 97% of the brokerage’s clients saw their D&O premiums decrease, and 75% decreased their self-insured retentions.

Newer public companies are seeing the biggest rate decreases, which “is not unexpected because they saw the biggest increases in the hard market,” she said.

With rates falling, Ms. Miller said Woodruff Sawyer is encouraging policyholders to “take a fresh look at their limits” and their Side A fiduciary coverage because breach of fiduciary duty lawsuits “continue to be an issue.”

Nearly 80% of Marsh LLC’s clients saw their D&O rates decrease, said Washington-based Ruth Kochenderfer, the brokerage’s D&O products leader for the U.S. and Canada. Five percent of Marsh’s clients saw no change in their rates, and 15% saw a rate increase, she said.

Flat or decreasing D&O rates at midyear contrast with the sharp increases that occurred from 2018 until 2022, when the market was driven by a high volume of mergers and acquisitions and deals involving special purpose acquisition companies. That activity, which has since slowed significantly, resulted in more capacity entering the market.

The increased number of insurers in the D&O market is driving competition, said Mr. Doherty of USI.

“There’s a lot of hunger in the market. Insurers are fighting to keep their deals. There’s not a lot of new buyers, and the capacity has been generally stable,” said Timothy Fletcher, Los Angeles-based CEO of Aon PLC’s financial services group.

With rising claims, though, flat rates are becoming more prevalent, said Joseph Spallone, a New York-based executive vice president and head of management liability insurance at Sompo.

“With claim counts, settlements and costs to defend these cases all increasing, carriers have to maintain pricing integrity. Carriers have remained disciplined as it relates to increasing limits where we are seeing $5 million limits going to $10 million but not seeing carriers go back to offering $15 million or $20 million limits,” he said. 

Chris Pass, co-president of RT ProExec, a unit of Ryan Specialty Holdings Inc., and leader of its financial institutions team in Bloomfield, Connecticut, said the current D&O market is putting pressure on underwriters that budgeted for growth.

Competitive insurers are trying to retain existing clients and attract new ones by leveraging their existing relationships with policyholders and brokers, their reputation, financial backing and claims payment history, Mr. Fletcher said.

Some insurers are offering expanded coverage for entity investigation and chief information security officers, experts say. 

Some charge for entity investigation coverage as an add-on to primary coverage, while others don’t, Mr. Spallone said.