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Australian businesses have been facing skyrocketing D&O premiums in recent years but while the hardening market certainly provides its challenges, one industry expert says it also offers an opportunity for brokers.
Speaking to Insurance Business, Julie Hamilton (pictured) – Aon’s national D&O practice leader – says the current landscape gives brokers the chance to show clients what they truly bring to the table.
“When the environment is a little bit more challenging, it provides us with the opportunity to showcase our skillset and help clients secure exceptional outcomes that may not be possible to achieve without that same level of experience,” says Hamilton.
As a senior broker with over 30 years’ experience in the D&O space, Hamilton says the only way to secure these exceptional outcomes under such challenging circumstances is to engage with insurers well before renewal time.
“Insurers are becoming increasingly cautious in the deployment of their capacity so strategic planning and early engagement are essential to achieving the best outcome,” says Hamilton.
Hamilton says the brokerage works closely with its clients to help them understand what insurers are looking for and assist them in differentiating their risk profile.
“By doing that, the insurers can obtain a much higher degree of comfort with the risk and therefore understand how that risk fits with the rest of their portfolio and price accordingly,” she says.
“Typically, some of the key areas of interest are understanding how the clients manage their continuous disclosure obligation, they’re also interested in how the business is travelling, whether they have a volatile share price, whether they’re involved in M&A activity, what their debt profile looks like – there are all sorts of areas which influence the risk profile.”
Of course, even with a hands-on approach from expert brokers, clients are still going to see price increases in the D&O space.
In fact, a recent report from Aon showed that companies in the ASX200 experienced a median 122% increase in D&O premiums in the second half of 2018 following an 89% gain in the first six months.
Looking ahead, the report said pressure on premiums will continue for listed firms, and companies with smaller market capitalisations may see relatively large increases.
However, Hamilton says brokers should be working with clients to keep them in the loop, so price hikes don’t come as such a shock.
“We invest a lot in that area and really ensure our clients are very aware of what’s happening in the market,” says Hamilton. “We operate on a very transparent basis and we like to educate our clients, so they feel informed and there’s no surprise there for them.”
