US D&O underwriters foresee slowdown in rate decreases

Just 21% of D&O underwriters in the US predict rates will continue to soften into 2025, down from 30% last year, according to broker Woodruff Sawyer. Publishing its annual D&O guide, the broker tracks a slowdown in rate decreases for D&O buyers at mid-year 2024, as carriers remain mindful of underpricing the risk.

“Underwriter sentiment predicted the hard market in 2021; their response to whether rates will continue to go down today and moving forward should not be ignored,” the report says.

But the US-based broker said corporates are still likely to have options for cost savings in their D&O programmes, as new market entrants look to build market share into 2025.

“Established carriers will work hard to keep rates at what they deem reasonable to avoid the dynamic of underpricing today only to then be forced into hard market pricing or leaving the D&O market altogether,” Woodruff Sawyer says. It flags the “yo-yo” costs experienced by buyers as rates fluctuated between “skyrocketing” increases in 2021 to “precipitous drops”.

In analysis of Woodruff Sawyer’s D&O clients, 83% of corporates recorded a fall in premiums during the first half of 2024. But the broker notes that for the first time in 18 months, the number of increases and flat renewals are up, with 12% paying more and 5% paying the same. The same survey for the first half of 2023 recorded rate increases for just 3% of companies.

All underwriters surveyed for the report say D&O risk will either increase or stay the same.

Woodruff Sawyer says 2024 could breach 200 securities class actions for the first time since 2020. The number is running at 104 at mid-year after “brisk” filing activity in the first six months. This compares with peak years 2018-2020, when 233 securities class actions were filed on average per year, and preceded the hard market in 2021.

So far this year, technology, biotechnology and manufacturing have driven securities class action, with suits filed against technology companies accounting for 34% of litigation, Woodfruff Sawyer says.

The report also records 41 settlements in the first half of 2024 for a total of $2.1bn, matching 2023’s record-breaking first half. Apple led the settlements by size, at $490m, followed by Under Armour and Alphabet.

“Larger dollar settlements are a trend that is not going away in 2024,” the broker says. “Suits against established companies with large market caps are now resulting in cases that take longer to settle and often result in larger settlement dollars.”