Primary directors, officers rates up 4.1% in fourth quarter: Marsh
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Primary directors and officers insurance rates increased 4.1% in the fourth quarter of 2012 and buyers should prepare for more price firming this year, Marsh Inc. said Friday in an analysis.
While overall rate reductions were achievable until the fourth quarter, excess insurers now are more disciplined when considering capacity, the New York-based insurance broker said in the report.
Increased regulatory enforcement activity by the Justice Department and Securities and Exchange commission, a greater focus on Foreign Corrupt Practices Act violations, whistle-blower activity, and mergers and acquisition litigation are factors in the 4.1% fourth-quarter increase in rates.
While primary D&O rates increased at a greater pace than rates for total D&O programs in the fourth quarter, Side A difference-in-conditions coverage remained stable, Marsh said.
D&O rates varied significantly by company size, with primary and total D&O markets for companies with $300 million or less in market capitalization firming faster than other segments. M&A litigation drove much of this tightening for small- and midsize companies, according to the report.
Industries such as life sciences, communications, media and technology, saw the steepest rate increases for primary and total D&O programs.
To best position their insurance programs for favorable renewals in 2013, risk managers and insurance buyers should engage the insurance market early and provide transparent information on their risks, Marsh said.
“Regular, direct communication with underwriters throughout the year remains critical to achieving optimal results at renewal,” Marsh said in the report, “Marsh Risk Management Research.”
The report evaluated insurance market rate changes via risk-adjusted benchmarking, which accounts for individual differences in program features from Marsh’s client renewal data.
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