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D&O coverage held steady in fourth quarter, Aon reports


Pricing overall for directors and officers liability insurance remains “pretty stable” says Aon Risk Solutions in its quarterly D&O pricing index report for fourth quarter 2013.

Pricing for fourth quarter 2013 was down 2% compared with the same period in 2012, according to the Quarterly Pricing Index issued Tuesday by the Aon P.L.C. unit, while programs that renewed in both fourth quarter 2012 and fourth quarter 2013 posted a 1% decrease in pricing.

Analyzing changes within layers, the report found that primary policies that renewed in both fourth quarter 2012 and fourth quarter 2013 with the same limit and retention increased 0.7% on average, which was the lowest primary quarterly increase since Aon started tracking these increases eight quarters ago.

“Remembering that D&O programs are most often built on a layered basis, basic math would indicate that excess pricing is decreasing by enough to compensate for the increase in primary pricing, resulting in the average total program renewing down 1%,” said the report.

Aon's report for the third quarter also concluded that D&O liability insurance pricing decreased primarily because of declines in pricing for excess coverage.

Among other survey results in its latest report, Aon clients purchased an average of 5.5% more limits in 2013's fourth quarter, than in the prior year. Of companies that were in both fourth quarter 2013 and fourth quarter 2012 samples, 25.4% of companies purchased higher limits than in the prior year, with only 2.1% reducing their limits in 2013's fourth quarter.


In addition, during the fourth quarter, 18.6% of D&O program deductibles increased, with those clients retaining more upfront risk.

The report also states that while insurer underwriting and claims behavior improved as a whole last year, “we've recently observed some new and aggressive coverage positions by some primary carriers on derivative claims. We assume this has to do with their profitability issues, but will closely watch and push for developments over the next few quarters.”