Tech Companies Increasingly Unhappy With Their D&O Cover: Marsh

Technology companies’ satisfaction with D&O coverage has dropped sharply so far 2021, as pricing soared and insurers narrowed their terms and conditions, Marsh found in a new study.

Approximately 45 percent of customers in the sector saw their directors and officers liability cover as adequate, compared to 84 percent in 2020. About 35 percent view their coverage neutrally, up from 13 percent the year before. A solid 20 percent said their D&O coverage isn’t adequate, versus just 3 percent in 2020.

Why the change? Marsh suggests that a variety of factors are involved, with a big cause stemming from increased management risks at the same time public trust in the sector is declining, “leading to more scrutiny and activism.”

COVID-19 risks are a factor, too, and all have contributed to price hikes.

Marsh noted that D&O pricing for tech companies jumped nearly 40 percent in 2020, while property pricing grew almost 30 percent. Price hikes hit for cyber, tech E&O and casualty coverage (excluding workers compensation.) As well, Marsh noted that insurers are also narrowing their terms and conditions and increasing their underwriting scrutiny, leading to a more selective deployment of capital.

Marsh’s annual study surveys communications, media, technology and emerging industry risk professionals and executives globally, and 170 responded for its 2021 report.

Among additional findings:

• 37 percent of respondents said they expect their directors and officers liability risk to be more of a concern in the next three to five years. Nearly 20 percent said COVID-19 has worsened that risk.
• About 3 percent of respondents said “trust” is not discussed within their organizations today, while 64 percent said they believe that establishing greater trust can help moderate their cost of risk or keep it below that of their peers.
• 72 percent ranked data security and privacy as a top business risk, while 54 percent said digital interruption was at the top of their list of concerns.
• 20 percent of respondents reported that the pandemic has had a significant adverse effect on their revenue or represented an existential threat to their business.
• 63 percent of respondents are increasing retentions, and 54 percent are exploring integrated, structured, or alternative risk programs as a result of market conditions.

The full report is Marsh’s 2021 Global Technology Industry Risk Study.

Source: Marsh