Global survey reveals no reduction in D&O policy limits but higher pricing

Directors and risk managers globally have not seen reductions in policy limits in the last year, but the majority have seen premium increases, with some looking at alternatives to the insurance market. This is according to WTW’s Directors’ Liability Survey 2022, in partnership with Clyde & Co. As part of the survey of directors and risk managers based in more than 40 countries around the world, WTW asked about D&O insurance and their corporate indemnification arrangements. It found that 72% of WTW clients said their organisations indemnified their directors to the fullest extent allowed by law, while 11% said the indemnification was only where approved by shareholder vote. The survey found that just 11% of respondents had seen reductions in their policy limits during the last year, with just 2% saying they anticipated a reduction next year. By contrast, said WTW, 64% had seen an increase in premium and 44% anticipated an increase next year. Of those who had seen their limits change, 44% said this was down to increased cost while 44% said it was down to availability of capacity. WTW said the limits of liability being purchased by the respondents’ organisations “also varied remarkably”. While most companies with revenue of $5bn or more purchased $100m-plus of D&O insurance, 13% purchased only $10m-$19m and 1% only $4m-$9m. It also found that 2% of organisations between $1bn and $5bn revenue purchased no D&O insurance, which rises to 6% for organisations with revenues between $50m and $1bn, and 16% for organisations with less than $50m in revenue. The survey reported that up to 20% of respondents said their businesses were considering implementation of alternatives in the future, the main one being a personal guarantee of directors liabilities from a CEO, major shareholder or other source (7% of respondents). But it also noted that captives are being used for D&O. According to WTW: “While the use of captives for Side B or Side C has been done in a number of situations, in our experience, the Side-A solution has tended to be more expensive than simply purchasing insurance from the commercial D&O market. However, in our survey, marginally more respondents indicated their organisation had used a captive insurance vehicle for Side A (6%) than for Sides B/C (5%). A further 18% and 20% (respectively) were considering doing so in the future.” WTW stressed that, by far, the majority of respondents indicated none of these alternative risk transfer solutions were in place or under consideration, “and this matches our experience in practice”, adding: “Nonetheless, it is interesting that a fairly significant number are still considering implementation in the future.” The broker noted that since the survey was conducted, there has been a material development in the US and in particular in Delaware, where the state has recently passed a law making it clear that a standard captive can insure directors for Side-A losses. “The usefulness of this law is, for now, confined to companies registered in Delaware and it remains to be seen whether any other US states or indeed any other jurisdictions will adopt similar legislation,” said WTW. The WTW/Clyde & Co survey also asked respondents to rank the value they see in various aspects of their D&O cover. The most important was deemed to be understanding how D&O claims will be controlled and settled, and a choice of lawyer-counsel. Indeed, handling and settlement of claims was number one in all regions except North America where it was choice of lawyer, and Latin America where it was cover for fines and penalties.

Global survey reveals no reduction in D&O policy limits but higher pricing

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Related Articles