قالب وردپرس درنا توس
Home / Insurance / Excess D&O rates fall as competition intensifies

Excess D&O rates fall as competition intensifies



Policyholders saw interest rate cuts of up to 35% in the July renewals for liability risks for board members and salaried employees, due to significant capacity in excess layers and increased competition, experts say.

Companies that had experienced the largest increases in the last four years are receiving the largest decreases, with limits cut during the tough market being restored and retentions being lowered.

The declining market trend will continue at least this year and into 2023, experts say.

However, some lines are still problematic, including cyber; environmental, social and governance risks; and cryptocurrency-related lines, they say.

Public companies̵

7; R&D cuts have ranged from 10% to 35%, with insurance companies “chasing down interest rates,” said Corey Turner, Atlanta-based vice president, professional line group for Amwins Group Inc.

“D&O renewals are buyer-friendly for the most part,” with good competition and in many cases unchanged prices at worst, says Andrew Doherty, New York-based national manager and professional risk management leader for USI Insurance Services LLC. “I see it continuing to show declines, at least for the foreseeable future,” he said.

Mr. Turner said the market is driven by significant capacity, while the new public D&O coverage business pipeline has been shut down due to a lack of IPOs and special-purpose corporate transactions.

Matthew McLellan, Washington-based CEO and D & O product manager for Marsh LLC, said that where previously new entrants had led the competition, “we now see older insurance companies catching up, so there will be much more competition for each account.”

Observers say that companies that have previously experienced the largest increases see the largest decreases in their D&O interest rates when the market is recalibrated.

Also seeing more relief are companies that went public at the height of the IPO market, said Teresa Milano, Boston-based vice president, management responsibility, with Woodruff Sawyer & Co. Reports say that IPOs reached a peak last year.

Competition is tougher in surplus inventories, which is a turnaround from 2020 and the first part of 2021, when the average interest rate increase was higher in the excess inventories, McLellan said.

Experts note that new market players traditionally start in excess stocks before entering the primary business.

“Not many people want a whole new market at the primary level. Most insureds still have some interest in more long-term capital in their first stocks and more experienced insurers,” said Larry Fine, New York-based liability insurance manager for Willis Towers. Watson PLC, which estimated that there have been about 30 new entrants to the market, all of whom are writing cover.

However, Tim Fletcher, Los Angeles-based CEO of Aon PLC’s financial services group in the US, said that “there are still a lot of risks in the system”, including supply chain problems, disruptions due to the war in Ukraine and fears of recession.

Despite the softer market, insurance companies are hesitant to write new cryptocurrency deals, which has been a challenging sector due to the large value losses reported in recent months, McLellan said.

There is also uncertainty about de-SPAC transactions, with several hundred blank check companies looking for merger partners, he said. There is a concern that the investors behind the companies may engage in transactions that they might not have done otherwise “because they are up against the clock to complete,” McLellan said. SPACs usually have two years to make an acquisition after their IPO.

At the same time, the US Securities and Exchange Commission is beginning to look at corporate statements about ESG risks, and shareholder derivative claims are beginning to be filed, McLellan said.

Insurance companies “are starting to ask more questions that are explicitly focused on the ESG issue, but there is not a full consensus on what the scope of ESG is,” said Mr. Fine. “My general opinion is that insurance companies mostly want to be assured that companies are aware of the importance” of the issue and take it seriously.

D&O interest rates will continue to soften, says Abby Bellgrau, Chicago-based executive underwriter, management liability, at AmTrust Exec, a unit within AmTrust Financial Services. But macroeconomic issues such as inflation, labor shortages, supply chain constraints, the war between Russia and Ukraine and the fallout from covid-19 could help stabilize them, she said.

The effect of a possible recession “is a bit unknown”, says Doherty at USI.

“I do not think it will have a dramatic kind of reversal, strengthening effect if it is not maintained and companies start to have real financial problems. But it may take a while before it shows up,” he says.


Source link