Directors and officers liability insurance pricing dropped nearly 5 percent during the 2014 first quarter compared to the same period a year ago, Aon’s Financial Services Group concluded in a new report.

The coverage should continue to remain steady overall, however, due to capacity surplus and generally positive property-casualty underwriting results, the insurer said in its quarterly D&O pricing index.

“We believe that the surplus of capacity, combined with overall positive P&C underwriting results, will continue to make for an overall stable D&O pricing environment for public companies,” Aon said.

Among Aon’s pricing determinations for the 2014 first quarter:

  • Overall D&O pricing dropped 4.8 percent per million of coverage versus the same period last year. But pricing on programs that renewed in both the 2014 and 2013 first quarters dipped 3.6 percent.
  • Primary price per layer jumped 1.7 percent per million of coverage over the 2013 first quarter.
  • A whopping 87 percent of primary policy premiums during the quarter remained flat or increased.
  • Interestingly, 9.1 percent of deductibles jumped year-over year.
  • In the 2014 first quarter, 22.7 percent of companies purchased higher limits than in the 2013 first quarter, but only 2.3 percent cut back on their limits versus the same period last year.
  • About 75 percent of primary limits remained unchanged during the quarter.

Aon noted in its pricing index report that there is much more market capacity for D&O insurance than in previous periods. This trend, Aon said, will help contribute to continued market stability.

“We are pleased to state that the new capacity we recently reported on is not only being put to use, but that some of it is being utilized on the primary layers,” Aon said in its report. “The overall increase in capacity coupled with some potential new players in the primary D&O space should make for a stable to improving D&O marketplace for customers in 2014.”

Aon added “incumbent carriers should consider flat to be a winning proposition given these dynamics.”

Aon puts together its quarterly pricing index using data compiled on more than 8,825 D&O programs for publicly traded companies between Jan. 1 2001 and March 31, 2014. The base year, 2001, is the average price per million for $1 million of coverage costs for the 2001 calendar year.

The index reflexing Aon’s average price for $1 million in limits hit 0.79 overall for the 2014 first quarter, down more than 19 percent from .98 in the 2014 fourth quarter. Aon attributed that, however, to the mix of business from one quarter to the next.

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