Driven by premium decreases in excess layers, companies experienced a 4.8% drop in their directors and officers premiums for this year's first quarter vs. the same period a year ago, Aon Risk Solutions said in its D&O pricing index report for the first quarter of 2014, issued Monday.
Programs that only renewed in both the first quarter of 2014 and during 2013's first quarter experienced a 3.6% decrease, according to the “Quarterly D&O Pricing Index” report.
Isolating the different layers, however, Aon found primary policies that renewed in both 2013 and 2014's first quarter with the same limit and retention increased, on average, 1.7%.
“Remembering that D&O programs are most often built on a layered basis, basic math would indicate that excess pricing continues to decrease more than enough to compensate for the increase in primary pricing, resulting in the average total program renewing down 3.6%,” says the report.
The report also examined the number of companies that experienced a decrease on their primary layer vs. a flat renewal or an increase. “The total number of primary decreases is still in the minority,” says the report. “The number of clients receiving decreases on the primary layer leveled off at 13% in Q1 2014 after having risen steadily during the last three quarters of 2013. Overall, the vast majority of primary renewals are flat to slightly up, but the trend of those that are experiencing increases continues to decelerate slightly,” says the report.
For 2013's fourth quarter, Aon reported that programs that renewed in both fourth quarter 2012 and fourth quarter 2013 posted a 1% decrease in pricing.