Report: D&O Insurance Costs Highest for Financial, Tech, Life Science Firms

February 5, 2008

A new study has found that the financial services, technology and life sciences industries face the highest premiums for directors and officers liability insurance, with the lowest premiums found in energy and manufacturing.

That’s according to Carpenter Moore, the wholly-owned insurance brokerage subsidiary of The Nasdaq Stock Market, Inc., which released its annual global Directors & Officers Liability Insurance Peer Benchmarking Report.

“We find that no matter the market cap segment, the three industry sectors that pay the most for D&O insurance are financial services, technology, and life sciences,” said Lauri Floresca, senior managing director and author of the report.

The results make sense in light of litigation trends.

“This is in line with data on securities class action filing rates, which consistently ranks those three industries as the most likely to face litigation. In 2007, the bulk of the 166 cases filed were brought against companies in those three industry sectors,” Floresca said.

The results also suggest that there is a correlation between financial market volatility and federal securities class action suits. For example, Floresca said, the mortgage crisis led to a big jump in cases filed against financial services companies, with 28 percent of the total up from an average of 12 percent between 1997 and 2006.

The 2007 Carpenter Moore D&O Benchmarking Report assesses data for policy renewals on more than 500 publicly traded companies that placed D&O business through more than 65 different insurance brokers worldwide.

Source: Carpenter Moore
http://www.nasdaq.com/newsroom/news/pr2008/2007benchmarkingsurvey.pdf.

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