D&O market sees increased capacity

The management responsibility market faces significant challenges from the COVID-19 pandemic, but will benefit from increased market entry capacity, a brokerage executive said.

Even before the pandemic, the industry faced several challenges, including an increase in class actions and early hikes in premiums and retainers, said Christine Williams, CEO of the New York-based financial services group at Aon PLC.

She spoke at the annual Professional Liability Underwriting Society of Minneapolis Directors and Officers Symposium, which was held remotely last week.

“We started 2020 with a series of challenges” that were only reinforced with the impact of COVID-19 from March, Ms. Williams said.

Meanwhile, there has been an increase in activity related to Special Purpose Acquisition Companies, or SPACs, which has led to around 40 lawsuits, she said.

There may also be employment practices liability claims related to workplace safety, downsizing, working remotely and returning employees to the workplace, he said. she declared.

Lawsuits have also been filed for allegedly excessive trust fees and an increase in ransomware. And although the number of securities class actions declined slightly last year, they remained at high levels, Ms. Williams said.

Four months after 2021, “we continue to see portfolio adjustments broadly out of the door,” and rates continued to come under upward pressure, she said.

However, there have been about a dozen new entrants to the management liability market in the United States and London, Ms. Williams said. “This is the start, but I think they will be able to provide sufficient capacity,” she said.

Ms Williams also referred to the movement of personnel in the industry. “I don’t remember where we saw so much movement,” both among brokers and insurers, she said. “It will definitely lead to competition” in the excess layers, she said.

John Doyle, president and CEO of Marsh LLC, said in a separate session that he saw signs of moderation in D&O prices in the first quarter, which is expected to continue.

Capital moves faster than at any time in his career, he said, “and he’ll be looking for pools of profit, so things tend to stabilize pretty quickly.

During a session on new entrants to the market, there was a discussion of why so many are in London or Bermuda rather than the United States.

In the UK, entities have the ability to upgrade quickly, and the freedom of rate and form, while in the US, new markets are forced to go through different states, involving many layers ” and there is a lot of work that needs to be done to prepare the entity document, ”said Jack Kuhn, CEO, Insurance, Vantage Risk Ltd. in Berkeley Heights, New Jersey, whose parent company is based in Bermuda.

Another session focused on conditional liability insurance, which covers safety class actions that survive motions to dismiss. “This type of product helps level the playing field,” said Paul R. Bessette, co-chair of the corporate and securities litigation firm of King & Spalding LLP in Austin, Texas.

In a session on international directors and officers insurance, Chris Warrior, UK business management liability manager based in London for Berkshire Hathaway Specialty Insurance Co., said the market was at a crossroads, London insurers strengthening their appetite to provide new capacity.

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