According to Aon’s Quarterly D&O Pricing Index, “US financial institutions (FI) saw premium increases of 15 percent on average in Q2,” as did a number of the UK’s financial institutions. “However,” Aon notes, “renewals have been mixed and will continue to depend on specific risk factors and financial performance.
“The Q2 2009 Index, which tracks premium changes relative to the base year of 2001, delves into the trends seen year over year for this essential line of coverage. The analysis finds that pricing increased 4.07 percent in the second quarter as compared with the second quarter of 2008.”
Aon found that “current rates in the S&P Financials sector (banks, diversified financial, insurance and real estate) are up 14.77 percent. The economic turmoil means rates are increasing significantly, capacity is constricting and coverage terms are tightening.
“Meanwhile, all other S&P sectors (service, manufacturing, technology, etc.) were flat, marking the first time in more than three years that rates did not decrease.
“Exceptions seen in the commercial realm stem from industries rife with bankruptcies. But in the UK, abundant capacity for most buyers means that those prepared to shop around can still find bargains in the market. This is more so in the excess than the primary market as we see new entrants fighting the established players for market share.”
One factor pushing up U.S. premiums, particularly in the automotive sector, was the bankruptcy filing by General Motors and Chrysler. Aon indicated that the “UK D&O market has not experienced the same challenges. Pricing in the related sector in the US is up nearly 44 percent (consumer discretionary). In the UK it is flat with premium reductions available in certain instances.”
Adam Codrington, executive director at Aon’s financial services group, commented: “There has been a definite rise in UK claims activity but mostly confined to the primary layer of programs. We anticipate that this will lead to frictional erosion of margin for primary players, while excess players continue to be relatively unencumbered by non FI related claims.
“As such, we are seeing attempts to increase premiums in many incidents but they are being held up by competition in the market.”
“The delicate balance between the forces holding D&O prices down and the need for rate increases could soon shift in the favor of underwriters,” said Michael D. Rice, II, national practice leader of Aon’s financial services group in the US. “Fortunately for Aon’s clients, pricing in the D&O marketplace continues to remain at soft levels.”
Source: Aon – www.aon.com
Was this article valuable?
Here are more articles you may enjoy.
Jury Awards $80M to 3 Former Zurich NA Employees for Wrongful Termination 
Dubai Floods Expose Weaknesses to a Rapidly Changing Climate 
AIG General Insurance Chairman McElroy to Retire May 1 
FBI Says Chinese Hackers Preparing to Attack US Infrastructure 
