The softening insurance market is depressing pricing for directors and officers liability coverage, visible both in the third quarter and the first nine months of 2015, a new report from
Aon Risk Solutions concludes.
During the last quarter, the price per $1 million in D&O coverage fell 10.3% compared to the same time last year. More than one-third of policyholders renewing with the same limits and deductibles saw lower prices, and just 21% were quoted a higher premium. The overall change for primary D&) renewals was down 1.6%.
The third quarter results are indicative of a larger trend. Viewing 2015 as a whole, the D&O price per million was down 5.7% during the first nine months of the year compared with the same time period in 2014. Thirty-one percent of policy renewals with the same limits and deductibles had lower prices, and 27% had higher prices.
The overall price change for primary policy renewals was down 0.7% for the first nine months of the year, according to the report.
Aon’s findings are relatively in line with projections from rival broker Willis, which anticipates a -5% to +5% change in pricing for D&O policies.
In its “Marketplace Realities 2016” report, Willis says consolidation in the market – such as the merger between ACE and
Chubb – will keep prices from declining significantly. Financial institutions are expected to see the largest drops in rates for D&O policies, anticipated to be flat to -5% on the primary with excess rates dropping in the range of -6% to -12%.
For private companies and nonprofits, Willis anticipates “relatively firm pricing” with rate increases likely for healthcare companies, homeowner/condominium associations, educational institutions and nonprofit entities.
Public companies, meanwhile, will experience a range of flat rates to a slight decrease in pricing.
“On average, rates are moving plus or minus 5% with first-quality primary carriers less often effectively seeking rate increases for accounts,” the broker wrote. “For more challenging exposures, markets with thinner overall premium seem less willing to take risk, which is likely to mean higher premiums, particularly for lower layers.”
