Date: Monday, November 8th, 2021 by Michaela Hickson.
D&O pricing increases 30-100% across the globe
Global Insurance Law Connect’s latest research uncovers global pressure in D&O across the world, but sees opportunities for recovery in the coming year
8 November 2021 – Legal network Global Insurance Law Connect today launched its first research report into global D&O markets. The report has had input from insurance lawyers in 20 countries around the globe, and its headlines are startling.
Globally, D&O pricing has risen in almost every country during 2021, with increases between 30% and 100% reported in countries worldwide. Only Taiwan, where high barriers to litigation against directors and officers make this a little-used product, has seen prices decrease. (See graphic below.)
The causes of price rises
The price rises see some common causes, but individual countries have their own issues. In Brazil, João Marcelo dos Santos of Santos Bevilaqua says: “Rising D&O claims in the last five years link to corruption charges, environmental damages, administrative liability around securities operations, mergers and acquisitions impacts on tax, labour and anti-competition faults.
Meanwhile in Asia, markets such as China, which have fast-growing growing D&O books,
have also seen increased securities-related litigation and in India, the basis for D&O claims has widened exponentially.
Companies have responded with strategic shifts in insurance buying
GILC’s report has uncovered some significant trends away from traditional D&O buying as a result of the global price pressure. In Denmark Jesper Ravn of Ark Law says that: “a number of publicly listed companies … have retreated from purchasing D&O insurance policies with full liability coverage. Instead, the companies self-insure D&O risks through a letter of indemnity in favour of the directors and officers.”
In Switzerland, it is also reported by GBF that companies have been actively investigating the establishment of captives for their D&O risks.
Buyers cap their spend on D&O
However, in some countries, the price limit has simply been reached. In Australia Dino Liistro of Sparke Helmore comments: “The recent experience of underwriters is that whilst insureds had been prepared to increase their spend, the limit appears to have been reached. Over the last year, insureds began maintaining the same legal spend in the face of rising premiums by increasing excesses or reducing limits of cover and in some cases looking to other risk management solutions to bridge the gap.”
Growth appetite remains
In spite of all this, the demand for D&O cover continues to grow. Our report found that emerging markets in particular have a growing appetite for D&O: Khaitan Legal Associates recounts that pre-pandemic “The demand for liability insurance surged in India.” In China, Buren explains that “demand for D&O insurance has snowballed in China in recent years.”
This growth is mirrored in Latin America, where the need for D&O insurance is significant, and capacity is desperately short because of the small number of insurers operating in the region.
There also remain European markets which have capacity for growth. Joachim Skjelsbæk of Riisa tells us that “the Norwegian market for D&O is still relatively new and has been growing steadily with increased publicity around D&O claims.” In the smaller European economies, D&O demand is still trending upwards.
Jim Sherwood, Chairman of Global Insurance Law Connect comments on the report overall: “In many countries D&O rates are rising, and in some places those increases are extreme, but this is not the case everywhere. In a few markets the green shoots of recovery are showing, as clients reach the limits of what they are prepared to pay, and prices look set to finally stabilise.”
“The changes of the past decade and recent economic shocks have led to an increased need for protection for directors and officers, in a market which lacks capacity to supply it. The impact has been a notable growth in self-insuring for this class of cover, alongside the increased use of letters of indemnity for directors and officers.”
“This report again showcases the unique local market knowledge and expertise our GILC members bring to their clients across our twenty-two jurisdictions worldwide. As leading independent specialists working closely and collaborating on the major challenges facing the insurance industry, the GILC network has delivered an important update.”
Victoria Sisson Luther Pendragon 07767 794208
Notes to editors
Global Insurance Law Connect is a formal alliance of insurance law firms spanning four continents. Founder member firms are BTG Legal (Italy), BLM (UK and Ireland) and Byrd & Associates (France). Other members are Advokatfirmaet Riisa & Co (Norway), Arnecke Sibeth Dabelstein (Germany), Blanco & Asociados (Spain), Buren Legal (China), Durukan (Turkey), Khaitan Legal Associates (India), gbf Attorneys-at-Law (Switzerland), Lee and Li (Taiwan), Lydian (Belgium), Molitor (Luxembourg), Ocampo 1890 (Mexico), Santos Bevilaqua Advogados (Brazil), Socrates (Finland), Sparke Helmore (Australia), and WIJ advocaten (Netherlands).
A cornerstone of the offering is 14 special legal and risk interest groups sharing expert knowledge with clients across classes of business such as product liability, D&O, marine, energy and cyber.
Our vision and focus is to use the strength and depth of our company to help our clients reduce the time and money they spend on managing risk. If you need a global group of legal advisers, delivering a creative, commercial and specialist service, talk to Global Insurance Law Connect today.
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