While D&O rates continue to rise, signs of moderation are on the horizon….unless you’re a SPAC
San Francisco, CA – September 21, 2021 – Woodruff Sawyer, one of the largest independent insurance brokerages in the US, announced today the release of the 2022 D&O Looking Ahead Guide. Since 2013, the Guide has reflected on and predicted the state of Directors and Officers liability insurance for corporations, calling out significant milestones and challenges for businesses and the marketplace alike. This year is no exception.
Woodruff Sawyer’s 2019 Looking Ahead Guide forecasted the rise of D&O premiums—the first increase in nearly 10 years—and predicted it would continue into 2020 and beyond. While pricing challenges remain for D&O buyers, new capacity and new competition are finally on the way with a dozen new entrants to the D&O insurance market. On the other hand, the D&O insurance market for SPACs is facing increasing difficulty. Unprecedented demand for D&O insurance combined with a surge in SPAC litigation and a surfeit of SPACs still looking to identify a merger partner have led to D&O premium increases of four to five times over 2020, a trend the Guide suggests will last through 2022.
The Guide also includes Woodruff Sawyer’s 5th annual Underwriters Weigh In™ survey. Composed of the world’s top D&O carriers, the survey is the only one of its kind with underwriters queried about the current D&O risk environment, risk appetite, and future pricing expectations.
Unsurprisingly, underwriters continue to be concerned that their insureds are not fully aware of the high cost of litigation. Seventy-four percent (74%) of underwriters believe that companies underestimate the current risk and cost of litigation. In addition, in a major change in insurance carrier sentiment, the survey notes that eighty-two percent (82%) of underwriters feel that the governmental regulatory environment is getting more difficult for public companies—not great news for directors and officers facing government scrutiny for issues such as cyber security, ESG, or SPACs.
There may be a hope for more moderated D&O insurance premiums in the future, however. Priya Huskins, Senior Vice President, Management Liability, and editor of the “D&O Notebook” blog series notes, “A significant cause of the high price of D&O insurance has been duplicative federal and state court Section 11 suits filed against IPO companies. Woodruff Sawyer organized the funding for the successful Sciabacucchi vs. Salzburg appeal. That decision has been a game changer for IPO companies, resulting in the dismissal of state-filed IPO cases. As a result, duplicative filings are down dramatically in 2021, from 52% of total Section 11 IPO filings in 2020 to 18% in 2021 so far. The elimination of duplicative state court suits means the elimination of the type of extortionary settlements some plaintiffs were able to achieve due to quirky differences between the procedural rules of state and federal courts. This is a win not just for D&O insurance carriers; it’s also a win for corporate America. ”
Watch Woodruff Sawyer’s 2022 D&O Looking Ahead Guide Webinar, that was held on September 29, 2021.
About Woodruff Sawyer
As one of the largest insurance brokerage and consulting firms in the US, Woodruff Sawyer protects the people and assets of more than 4,000 companies. We provide expert counsel and fierce advocacy to protect clients against their most critical risks in property and casualty, management liability, cyber liability, employee benefits, and personal wealth management. An active partner of Assurex Global and International Benefits Network, we provide expertise and customized solutions where clients need it, with headquarters in San Francisco, offices throughout the US, and global reach on six continents. For more information, call 844.972.6326, or visit woodruffsawyer.com.