Relief at last as rates down and capacity up in European and global D&O market: Gallagher

Risk and insurance managers in Europe and across the world are enjoying significantly improved D&O market conditions and are able to find higher limits at cheaper prices as capacity returns to the market after a very tough period, according to latest analysis from broker A J Gallagher. “We are seeing a broadening of coverage, with programmes being more openly placed onto broker forms, rather than more restrictive insurer wordings, and additional competition in the market driving down self-insured retentions,” said the broker on the European and UK market. “We will continue to see those programmes that renew in the second half of 2022 benefit from softening market conditions,” added Gallagher, although the broker noted that problems caused by the war in Ukraine could temper further softening. From a global perspective, the first half of 2022 has been an “interesting time” for the D&O liability insurance market, continued Gallagher. “The good news is that the first half of 2022 has been a brilliant time to analyse your D&O coverage and benefit from some cost-saving opportunities,” stated the firm. “At Gallagher, we have seen significant reductions in premium across the board and limits increasing for many of our clients. Of course, these insureds are very happy to join Gallagher or renew their existing programmes with a return to deflating premiums, especially in a period of rising costs elsewhere in their operations or supply chain and after a bubble of D&O costs that reached unsavoury highs in the past few years,” it explained. “Undeniably, this persistent fluctuation of D&O pricing can be a source of frustration for companies but in the moments of lowering costs, we can find positivity,” stated the firm. Gallagher said the wider impact on capital markets has played into clients’ favour at times. A stall in IPOs and related insurance premium means that insurers have to make budget elsewhere, often resulting in them competing “aggressively” on new and existing business, it explained. And as new insurers continue to enter the D&O market, competition means brokers are able to secure much lower prices for customers than were available in the market last year. Generally speaking, the fallout from the conflict in Ukraine appears to be stiffening the resolve of insurers to stand firm on terms and conditions, not least as they suffer big investment losses. But Gallagher said that, from a D&O perspective, the conflict in Ukraine has proved to be a very specific issue for a small number of companies that either have Russia exposure or had sanctions imposed upon them. “As the current conditions of spiralling inflation will take time to surface and D&O claims are long tail by nature, the pricing we are seeing right now is likely to remain unaffected for now so it’s a good time to work with a broker that understands the market,” stated Gallagher. In Europe and the UK, relief for customers has come largely in the form of premium reductions. These markets have softened significantly in the first half of 2022, said Gallagher. “Companies that are purchasing larger programmes will benefit more as we are seeing great savings in the excess D&O market. The new capacity providers in London and the revival of the more established markets and their wider scope for new business in 2022 are driving these savings,” it stated. “As international borders reopen without restriction, lockdowns and Covid-19 measures are looking to be a thing of the past. This gives underwriters comfort around European businesses concerning Covid-19 controls. However, with difficult worldwide events hitting the headlines, supply chain disruptions, rapid inflation and fluctuating commodity pricing are preventing the market from softening further,” added Gallagher. The broker gave one example of a large, global, UK-domiciled company in the tourism sector that had been heavily impacted by Covid-19. The broker said it has successfully secured the firm twice the limit for less than half of the expiring premium. “The client saved over £200,000 in premium, a drop in the retentions and a move away from an insurer policy wording to Gallagher’s own much broader broker policy form. The client benefited from an in-person meeting with the underwriters and an improving D&O market, with new entrants providing competitive pressure,” said the broker. In related news, Aon’s US clients saw a 14.7% decrease in the average price per million for their D&O liability policies in the second quarter compared with the prior-year period, according to a new report. However, the broker explained that this number was significantly impacted by two large clients that purchased 18-month programmes in last year’s second quarter and were not included in this year’s second-quarter results. Excluding those two clients, the pricing index decreased 6.5%.

Relief at last as rates down and capacity up in European and global D&O market: Gallagher

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