Litigation funder on D&O insurance market hardening: 'Not our fault'

Litigation funder on D&O insurance market hardening: 'Not our fault' | Insurance Business

Litigation funder on D&O insurance market hardening:

Last month, top broker Marsh warned that corporate Australia could be facing a future in which directors’ and officers’ (D&O) insurance is no longer available, affordable, or sufficient.

“Left unchecked, the combination of class action lawsuits, litigation funding, and massive D&O premium increases could have serious implications for the Australian economy,” said Craig Claughton, financial and professional practice head in the Pacific, at the time.

In its submission to the Parliamentary inquiry on litigation funding and the regulation of the class action industry in June, Marsh cited not only significantly higher premiums but also greater and unprecedented risk, notably lesser and more onerous coverage, punitive retentions, and historically lower limits.

It was highlighted how the surge in securities class actions in Australia has been impacting the management of D&O insurance programmes in the country.

Read more: “It’s likely that more insurers will withdraw from the market”

Previously, broking giant Aon made a similar assertion, identifying the active securities class action environment and resultant settlements as culprits for Australia being viewed as the most difficult market in the world to underwrite D&O insurance.

Litigation funding behemoth Omni Bridgeway, however, believes the finger shouldn’t be pointed at their sector or at litigators for the soaring costs of D&O insurance.

In an opinion piece published by the Australian Financial Review, columnist Jennifer Hewett cited Omni Bridgeway chief executive Andrew Saker as blaming ‘law-breaking’ organisations and directors for the class actions.

Saker argues that premiums are going up because insurers keep having to compensate due to erring companies and officers. The CEO was quoted as telling the publication: “Litigation funding doesn’t create the event, it follows the event.”

Hewett, on the other hand, urged readers to “follow the money,” pointing out that litigation funders get a share of the payout in exchange for backing class actions.