With loss costs mounting, insurers will continue to increase prices to cover new risk exposures for directors and officers liability (D&O insurance), according to a recent AM Best report.
Insurers have been speaking out about increased claims due to more lawsuits and more substantial damage awards.
A recent Best’s Market Segment Report found, “with the explosion of larger loss settlements, higher defense costs, and greater claims frequency, D&O insurers are striving to work more proactively.”
So-called “social inflation” – societal trends such as views toward increased litigation, as well as the #MeToo movement – is creating ongoing challenges in the D&O market.
Other factors, such as shareholder activism and rising cybersecurity risks, will continue to pose challenges to D&O underwriters, according to AM Best.
“Cybersecurity and protecting personal data from potential breaches are now considered key responsibilities of senior management, thus increasing the exposure of a firm’s D&O insurer to cyber-related claims,” according to the report.
Looking to the future, AM Best warned that companies who fail to address environmental, social, and governance (ESG) issues are likely to see brands suffer and stock prices drop. Those factors could complicate the D&O market.
According to the report, the D&O market remains highly competitive, with insurers re-orienting coverage, pricing, and relationships to the changing marketplace.
“The D&O insurers that refine their risk appetite and risk tolerance with the greatest effectiveness will likely have the best chance of successfully navigating the various headwinds they face,” AM Best reported.
Chivaroli and Associates Insurance Services is a full-service brokerage firm specializing in the custom-design and placement of insurance and alternative risk funding solutions for your healthcare organization.