Gallagher – D&O market conditions stabilizing for some business sectors

Directors and officers (D&O) liability insurance is becoming accessible and affordable for some business sectors as premiums drop and limits increase, but the market still remains challenging, according to Gallagher's Specialty Management Liability Insurance Global Market Update for August 2022.

For the first half of 2022, increased market competition and some new entrants to the market led to a significant drop in premiums and increased limits.

The global report outlined D&O conditions for five key market factors:

• Life sciences: The report found some relief in obtaining D&O cover for this sector, with insurers showing signs of becoming more willing to entertain lower retentions and less restrictive coverage;
• Logistics and infrastructure: These industries continue to experience disrupted supply chains and changing consumer demand levels, making insurers focus more on dangerous goods and demonstrated ESG;
• Natural resources: Assessing cover has become more challenging with ESG targets and guidelines set by Lloyd's restricting some companies – such as coal, nuclear, and oil and gas – and scope of cover;
• Retail and hospitality: Some enterprises such as hotels, restaurants, and travel agencies with solid finances and a favourable outlook enjoy premium reductions; and
• Technology: Insurers have become more willing to offer attractive coverage and pricing as the sector remains one of the most frequently exposed to litigation.

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Focusing on Australia, the report found positive indications of easing in availability and pricing as new D&O insurance market entrants offer fresh capacity to companies.

“While heavy pricing increases in recent years are easing, the business's risk management narrative remains all-important to securing the best outcome for clients, ESG risks needing particular care,” the report said.

As current inflation conditions are yet to impact insurers, combined with D&O claims being long tail by nature, Gallagher expects the pricing to remain unaffected.