Woodruff Sawyermpany has just released the latest edition of its “Looking Ahead” interactive guide for the 2015 D&O insurance renewal season. This report provides insight into D&O insurance market trends, hot topics this year in litigation and enforcement, and how corporations can prepare for their next D&O insurance renewal.
The interactive report covers everything from the U.S. and international markets, retention and pricing trends, premiums versus rates and the soft market/hard market dichotomy.
I’ll describe some of the Looking Ahead report highlights, below.
Pricing: Gains, Losses and Semantics
Insurance carriers saw an increase in net income of 60 percent (to $63.2 billion) in the property and casualty area in 2013, according to A.M. Best. On the buyers side, Q2 saw a decline in premiums for property and casualty insurance, according to data coming from The Council of Insurance Agents and Brokers (CIAB).
The “verbiage” is important when looking at rates versus premiums. As the report highlights, insurers can decrease the premium but still implement a rate increase by increasing the deductible and/or offering narrower coverage.
The report points out that “such tactics allow an insurer to compete in the market on pricing without necessarily eroding their own profitability.”
At Woodruff Sawyer, we look at pricing trends for the first $5 million in limit to analyze where the market is going. Here’s a summary of our findings in a screenshot from the report:
The Hard Market/Soft Market Dichotomy
Not too long ago, we shared data on the state of securities class actions for U.S. public companies. Some insurers have responded to the class action landscape by eliminating the primary and lower attachment layers in D&O insurance.
Those insurers who continue to offer the lower layers can raise their premiums; however, clients might see an overall decrease in D&O premiums due to the competitive market for the higher layers of the insurance offering.
Insurance Abroad: International Markets
“Roughly 15 percent of companies that are listed on U.S. exchanges are domiciled outside of the U.S. Not all of the local insurance brokers in those jurisdictions have experience handling U.S. listed companies.”
This scenario described by my colleague Jane Njavro in her article on foreign filers underscores the need for corporations to choose the right D&O broker for their international market needs.
In a piece of good news, D&O insurance markets outside the U.S. remain competitive, according to the Looking Ahead report.
Going into 2015, make sure to review exposure for regulatory and tax liability abroad on an annual basis, considering scenarios like the ability to:
- Indemnify employees
- Advance defense costs
- Use a non-admitted insurance policy
Coverage Terms: What to Expect
Heading into 2015, coverage terms remain broad. After the recent decision in Halliburton v. Erica P. John Fund, some carriers are offering reimbursement for event studies (to analyze the impact of a company’s disclosures) at the class certification stage of a class action lawsuit.
In other coverage news, some carriers have released expansive Side A forms that include:
- Multiple reinstatement of limits
- Coverage for fines and penalties (where insurable)
- Perpetual run-off for retired directors
Hot Topics: How to Respond
In addition to looking at the market trends for premiums, rates and coverage, the Looking Ahead guide covers the hot ticket items of the year thus far, including important litigation and U.S. Securities and Exchange Commission (SEC) enforcement trends.
Some of the issues examined include:
- Derivative suits
- Eavesdropping and insider trading
- SEC’s focus on cooperation
- Cyber liability
I invite you to download the latest version of the “Looking Ahead” report for more insight and renewal preparation tips from our partners here at Woodruff Sawyer.
The views expressed in this blog are solely those of the author. This blog should not be taken as insurance or legal advice for your particular situation. Questions? Comments? Concerns? Email: email@example.com.