Although primary rates for directors and officers liability coverage continue to firm on a traditional rate comparison basis, global broker Marsh says the excess market remains competitive with recently expanded capacity.

Rates for primary D&O coverage increased 4.9 percent for Marsh’s publicly traded U.S. clients in the second quarter. But when normalized for individual insurance program structure and risk profile differences, average primary D&O premiums in the quarter actually declined 0.97 percent, according to Marsh research.

In a report released Wednesday—Risk-Adjusted Benchmarking: D&O Rates Fall in Second Quarter—Marsh compares traditionally benchmarked insurance price changes to those that have been risk-adjusted. Average risk-adjusted primary and total program D&O rates fell in nearly all market cap segments.

Marsh’s risk-adjusted benchmarking uses data from a larger set of client renewals and normalizes rates for changes in exposures, including those related to market capitalization, stock performance, valuations, balance sheets, and differences in program structure such as retentions and limits. Traditional benchmarking considers only the change in price paid for insurance comparing clients with the same program structure with no changes to limits and retentions.

“With Marsh’s risk-adjusted benchmarking methodology, our clients now have an additional perspective into market rate changes in order to make more informed decisions about how to structure their insurance programs,” said Brenda Shelly, D&O Product Leader for Marsh. “By normalizing D&O premiums for changes in program structure and risk profile, our clients are able to determine how current market pricing is pacing with their exposures and risk management strategies.”

Source: Marsh