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More companies increase directors, officers coverage purchase: Analysis


More companies are increasing the amount of director and officers liability coverage they purchase, while pricing for private companies buying the coverage may be showing signs of a hardening market, according to survey released Wednesday by Towers Watson & Co.

The report, “Directors and Officers Liability: 2011 Survey of Insurance Purchasing Trends,” surveyed 401 organizations that buy D&O liability insurance. The group includes public, private and nonprofit companies.

One-quarter of public companies and 14% of private/nonprofit organizations said they increased their D&O program's total limits in 2011 vs. 2010, according to the New York-based consultant's survey.

“Particularly in the public space, it just shows the level of concern they have in terms of the broad range of potential constituents that can bring a claim,” said Larry Racioppo, executive liability practice leader at Towers Watson in Stamford, Conn.

“We've seen that it's no longer the traditional shareholder class action claim,” he said. “It's much broader than that,” he said in noting that larger pool of claimants exists in terms of regulatory-related claims, breach of fiduciary claims involving mergers and acquisitions, derivative claims, among others.

In its 2010 survey, Towers Watson said that 21% of respondents increased their D&O limits.

Sixty-two percent of public companies and 35% of private companies were able to achieve a pricing decline, according to the survey. But more private organizations experienced increased premiums—18% compared with 14% of public companies.

While the public sector still may be showing signs of competitiveness, “we’re seeing that real hardening, certainly in the private side,” Mr. Racioppo said.

In other findings, 81% of the survey respondents again said regulatory-related claims were among their top three D&O concerns, compared with 78% in 2010.

In addition, the survey found that the larger the company, the more likely it was to buy a local D&O policy. Sixty-three percent of companies with $10 billion or more in assets said they purchased local policies, while 35% of companies with $250 million to $999 million in assets did so. No companies with less than $250 million in assets purchased local policies, according to the survey.