Since the PLUS D&O Symposium earlier this month, the directors’ and officers’ (D&O) insurance sector has been under close scrutiny as participants look to get their arms around the wealth of external market conditions evolving policy pricing, coverage and terms and conditions. So, where does this market stand today with regard to pricing – and what factors are driving these trends?
To answer these questions, Insurance Business reached out to Jamie Bryant (pictured), VP at Acrisure London Wholesale, who highlighted that pricing trends continue to be driven predominantly by an oversupply of capacity and the resultant imbalance between supply and demand. “This has led to a softening of pricing across the board and a more equitable outcome for some of our clients following what many considered an overcorrection of pricing in some segments during the previous hard market cycle.”
Pockets of rating adequacy remain in the market, he said, and there are still some attractive opportunities for underwriters out there. Many of the underwriters are still wanting to grow and the long-tail nature of the class allows newer entrants to be more aggressive in attempting to gain market share.
He added: “While we do anticipate a deceleration in rate decreases through 2025, particularly in the primary and lower attaching excess layers, the oversupply of capacity in this space means there is unlikely to be a reversal in pricing in the near future absent of a contraction in total available capacity.”
Aside from pricing, there is a range of market trends dominating discussions about commercial D&O today. The most notable development outside of pricing has been a broadening of cover within the London market, Bryant said. This expansion of cover has been significant and includes some markets offering retroactive entity investigation cover within the primary, plus the emergence of new Broad-Form ABC and Side A DIC cover.
“Whilst the market is still highly polarised around this type of coverage, in particular the extent of coverage that should be afforded, there is no doubt that it is not going away anytime soon,” he said. “The Lloyd’s market, historically, has always been at the forefront of coverage enhancements, enabled largely by the quota share model that facilitates the syndication of risk and promotes innovation, and London is certainly at the forefront of this coverage revolution.”
There’s a wide variety of challenges that Bryant sees facing his team’s clients today, including but not limited to claims & litigation trends, regulatory shifts, and emerging ESG concerns. “A complex geopolitical environment, heightened regulatory scrutiny, economic uncertainty and a sharper focus on ESG is leading to increased exposures for D&Os globally,” he said. “All of which is underscored by intensified litigation activity, particularly in the US.”
Total securities class action lawsuits increased again in 2024, he said, and the litigation rate – i.e. the number of securities class action lawsuit filings relative to the number of U.S-listed companies – increased to 4% in 2024, up from 3.3% in 2023 and at the highest level since 2021.
“Furthermore,” he said, “as technological advancement continues to accelerate, D&O’s face new, evolving risks. Artificial Intelligence has emerged as a significant new risk with companies facing potential litigation stemming from AI washing. The number of AI-related filings in the US increased to 15 in 2024, compared to seven the year prior.”
As to what clients are looking for from their commercial D&O brokers in terms of support and advice when it comes to navigating this complex risk environment, Bryant highlighted that given the current market dynamics, his team is placing greater emphasis on selecting the correct insurance partners for clients for the longer term.
The market will eventually reach another reflection point, as the current rate of decrease looks unsustainable when viewed within the context of historic, average base rate premiums, adverse prior year developments in many cases, and the myriad of heightened exposures for D&Os. “Many of our clients are acutely aware of how quickly the market hardened in the previous cycle,” he said, “and we are working closely with all of our clients to build sustainable relationships with the right carriers to gain some consistency in a relatively volatile marketplace.”
