Directors and officers liability insurance will confront continued pricing pressure for the foreseeable future, hammered by everything from intense competition to a number of new risks, A.M. Best is warning.
The ratings agency says that D&O insurance writers are dealing with a pricing environment where rates aren’t keeping up with increasing risks. A.M. Best notes that some segments of the market—including public company D&O, private and nonprofit companies, and coverage for companies with initial public offerings—have experienced rate increases of between 5 percent and 10 percent. But overall, D&O rates have been generally flat since 2016, save for some modest increases through the first three quarters of 2018.
As well, the sector is getting hit with “intense competition” from lots of new markets, adding to the pricing pressure.
New and fast-evolving trends including the #MeToo movement to expose sexual harassment, cyber risks and technological developments also stand ready to add more complexity and systemic losses to the sector, A.M Best says.
In terms of #MeToo, the allegations of sexual misconduct against men in positions of power means D&O could field more liability rather than employment practices liability coverage. The reason why: Boards of directors are getting greater scrutiny in the face of these regulations.
Cyber risks and government response to them will also pressure D&O, such as the European Union’s General Data Protection Regulation, which puts more responsibility on corporation to protect consumer privacy or be subject to major fines.
“The GDPR and increased scrutiny of SEC and other regulators around the world can cause increased scrutiny in terms and conditions of D&O policies to identify explicit coverage and exclusion terms,” the A.M. Best report states.
A.M. Best warns that technologies such as artificial intelligence and blockchain stand ready to add liabilities to companies, particularly those with D&O policies, and insurers are exploring what the impact could be.
A.M. Best’s report is: “Emerging Risks and Greater Complexity Challenge D&O Insurers.”
Source: A.M. Best