Rates for directors and officers’ (D&O) liability insurance appear to be firming, having risen only 1.5 percent in the first quarter.
According to a benchmark report from insurance broker Marsh, that 1.5 percent increase compares to a 4.5 percent decline in D&O rates in 2011. Marsh tracked rates for U.S.-based public companies.
Marsh said primary D&O carriers are putting upward pressure on rates and, as a result, insureds are receiving smaller decreases or modest increases upon renewing their primary programs.
“Overall, the market remains relatively competitive, with abundant capacity. As underwriters continue to put upward pressure on rates— notably in the primary line— insureds are likely to renew with modest changes in rates, typically in a 10 percent decrease to 10 percent increase range. In fact, nearly 80 percent of programs have renewed in this range so far in 2012,” Marsh reported.
While the soft excess D&O insurance market is helping to mitigate the upward pressure in the primary line, rates charged for the total program — primary and excess combined — are also trending upwards, according to the report. The total limit rate still decreased an average of 0.76 percent and a median of 0.79 percent, but Marsh said that it is “considerably less” than the average and median in 2011, which were a 6.66 percent and 5.25 percent decrease, respectively.
Marsh said 38 percent of D&O primary limit renewals experienced a rate increase in the first quarter of 2012; whereas only 15.4 percent of programs saw rates increase in 2011.
More than 60 percent of primary limit programs renewed with a decrease in rates in 2011, including 22.1 percent that secured decreases greater than 10 percent. Thirty-two percent of primary policies renewed flat thus far this year, up from 23 percent in 2011.
Total program rates are also skewing up, although at a slower pace, Marsh said. In 2011, nearly four out of every five clients secured a rate decrease at renewal. In 2012, however, only 53.9 percent of insureds achieved premium savings. In contrast, more than 30 percent of clients experienced an increase at renewal in the first quarter of 2012, up from 10.1 percent who did so in 2011. An overall increase in total program rates seem to be mitigated, in some cases, by continuing downward pressure on excess rates, according to Marsh.
Topics Directors Officers
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