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D&O prices fall as capacity increases



Board and officer policyholders continued to see rate reductions during the January 1 renewals, due to significant capacity increases and the resulting increased competition.

With fewer IPOs and the collapse of the special acquisitions company or SPAC market, new and established insurers are vying for the remaining business.

D&O rates have fallen by several percentage points overall, with the declines particularly sharp in excess tiers, where new capacity is generally focused.

Insurance companies are generally not increasing the limits, experts say.

Rates for IPOs and de-SPAC transactions, which had risen significantly, are seeing more dramatic changes.

The majority of the commercial public D&O market has turned around, said Los Angeles-based Peter Taffae, a D&O liability insurance expert at wholesale brokerage Executive Perils Inc.

Allianz SE is seeing single- to low-double-digit declines in primary and lower excess inventories, with higher inventories seeing the most downward pressure, said Matthew Azzara, New York-based head of management responsibility for North America at the insurer.

In some cases, insurers reached out for renewals and asserted their interest in certain accounts, said Matthew McLellan, Washington-based senior vice president and D&O product manager for Marsh LLC.

“Insurers are looking for ways to differentiate themselves even more,”

; including by being open to formulary improvements and potentially broader coverage, he said.

The market turned faster than expected, said Andrew Doherty, New York-based national manager and professional risk solutions leader for USI Insurance Services LLC.

As the IPO, SPAC and de-SPAC opportunities left, insurers counting on that business looked for other places to grow, adding to the competitive environment, he said.

“Supply and demand continue to be the fundamental drivers of the D&O insurance market,” said Priya Cherian Huskins, San Francisco-based partner and senior vice president at brokerage Woodruff Sawyer & Co.

“During the tough market, we saw a lot more capacity, and that capacity is now chasing buyers, which is what creates a good dynamic for buyers,” she said.

“I’ve been surprised at how quickly interest rates have come down,” and it remains to be seen how low the floor will be, Huskins said.

Renewals in the first quarter “will be more telling” as accounts that had declines last year are being renewed, said Patrick Whalen, a New York-based underwriter on Beazley PLC’s executive risk team.

Some insurers “are holding the line and slowing the reductions, but we still see an overall downward trend for some time to come,” said Larry Fine, New York-based head of liability insurance for Willis Towers Watson PLC.

The more than 30 new D&O markets that recently entered the market “have not started to decline or consolidate yet,” while the increased premiums that insurers had expected from SPACs and IPOs did not materialize, he said.

“There’s a lot of talk in the market about stability,” with insurers pointing to the inventory of claims from previous calendar years that have yet to be settled, said Tim Fletcher, Los Angeles-based managing director of Aon PLC’s U.S. financial services group. States.

They “talk about trying to hold the line.” But at least in the coming months, we “expect a similar price environment” to the current one.

“The question for everyone is what happens in 2023,” said Kevin LaCroix, Beachwood, Ohio-based vice president of RT ProExec, a division of RT Specialty LLC.

While some have predicted the market will bottom out, LaCroix said he’s “a little more skeptical.”

With good capacity, incumbents are competing for business, and newer insurers have to justify their overhead, which will lead to more competition, he said.


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