Rates for directors, officers liability insurance firming: Marsh

NEW YORK—Directors and officers liability rates for public companies firmed in the first quarter, says Marsh Inc. in a special report issued Wednesday.

The primary limit rate, which is the price per $1 million of limit, increased an average of 1.5%, although the median rate is flat, according to the report, “Marsh Insights: Benchmarking Trends, Directors and Officers Liability Coverage for Public Companies.”

The report said in comparison, 2011 rates for primary limits decreased on average 4.3%, with a median decrease of 3.8%.

According to the report, 38% of D&O primary limit renewals experienced rate increases in 2012's first quarter, while only 15.4% of programs saw rates increase over the year in 2011. More than 60% of primary limit programs renewed with a decrease in rates in 2011, including 22.1% that secured decreases greater than 10%.

Analyzing the report, New York-based Lou Ann Layton, Marsh Inc.'s FINPRO practice leader, said one factor driving the increase is loss experience. Underwriters are “looking at this point in time as somewhat of a tipping point,” she said. There is a need to turn the tide around because the number of claims in the securities arena is not shrinking and there are more merger and acquisition claims on the horizon, Ms. Layton said.

Ms. Layton said rate increases are more pronounced on the primary than on the excess layers. This is because primary insurers “are the ones most likely to be affected by the M&A claims as well as the loss experience.”

Underwriters will continue to try to get rate increases on risk-specific renewals, she said. “In other words, if you have a client who's had losses, or is under investigation, or has deteriorating financials, or is being a target of a potential takeover, I think you're going to see underwriters take the opportunity to rate those risks higher than others.”