D&O rates increase for 95% of companies in Q1: Marsh report

A report by Marsh has revealed that 95% of public companies have faced increases to their Directors & Officers (D&O) programs in Q1 2020.

The report stated that primary rates increased by 26% for public companies, and program costs by 44%.

While costs increased sharply in public companies for the start of the year private companies also faced an increase, although not as dramatic.

“In the first quarter of 2020, average pricing for primary layers increased 8.5%, while total program pricing increased 8.9%. Some small pockets of buyers saw pricing increase by 50% or more,” the report stated about private companies.

This doesn’t seem to be a short-term trend either, with insurers believing the price increases will persist for a couple of years.

“Marsh expects to see rate increases continue to accelerate at least through the third quarter of 2020, and is closely monitoring market trends on a monthly basis,” Marsh said.

A report by Airmic earlier in the year found that 65% of companies surveyed were exploring captives due to premium increases in D&O and other lines.

The Covid-19 pandemic is impacting the exclusions that come with D&O as well, with insureds reporting new exclusions on their policies.

“Some insurers are introducing insolvency exclusions and — in some circumstances — requiring that buyers sign warranty letters,” the report stated.

“Several D&O lawsuits related to the pandemic have already been filed, including both securities class actions and shareholder derivative actions”