Directors and Officers (D&O) insurance pricing has continued to skyrocket, with a 59% increase in Q2 2020, according to Marsh.
The 2020 Captive Landscape Report by Marsh found that since 2019, there had been double-digit increases on the price of D&O every quarter.
“More than 90% of Marsh clients experienced an increase, a figure that climbed to 99% among publicly traded companies,” the report said.
Regulators have seen a 21% increase in professional indemnity lines in captives in the last year, showing how quickly interest is building.
This increase, according to Marsh, means that organisations who don’t current write D&O through a captive are looking for alternative solutions.
“As D&O losses have increased in frequency and severity, insurers have insisted that rates continue to materially increase,” the report said. “This pressure for buyers has manifested in primary, excess, and — more recently — Side-A premiums, which have been driven up by a steady influx of derivative claims and some large settlements.
“Given commercial market conditions, organisations are increasingly seeking alternatives for D&O insurance.”
While many captives write D&O Sides B and C, which cover business risk, it is difficult to write Side-A which covers non-indemnified loss.
“Side-A D&O coverage generally responds in the event that the company cannot, or will not, indemnify a director or officer,” the reports states. “The reasons for the inability to indemnify are generally due to legal or corporate prohibitions, or to corporate insolvency.
“A concern with placing Side-A D&O in a single-parent captive relates to the actual or potential conflict that could arise in the event that the captive, a subsidiary of the company, is asked to pay a claim for a director or officer that the company is not permitted to indemnify.”
However some organisations have found they are able to used a protected cell company (PCC) as an alternative to write Side-A D&O.