D&O defense costs improve: A.M. Best

Directors and officers insurance written premiums have been fairly stable for the past five years, but performance has improved, says A.M. Best Inc. in a report issued Tuesday on the market in 2018.

Best said the direct defense cost containment ratio, which reflects expenses related to the defense, litigation or cost containment of a claim, declined to 11.4% in 2018 from 14.7% in 2018.

Driving the improvement was a drop in federal securities class action lawsuits, from 412 in 2017 to 403 in 2018, although “they remain considerably elevated over prior years,” according to the report D&O: Is There Really Light at the End of the Tunnel?

The report said the drop in the number of securities class action lawsuits may also be because of the decline in the number of publicly listed firms, an uptick in rates and changes to underwriting strategies.

The report said loss and defense cost containment ratios improved for just 37% of writers, but they accounted for almost 60% of 2018 written premiums. 

The report said of 2018 premiums, about $5.6 billion were for claims made policies, $50 million for occurrence policies and $824 million were unallocated by the industry.

A total of 77% of monoline D&O writers also write D&O in commercial multiline policies, while 23% write solely monoline policies, according to the report.

According to the report, the biggest D&O writer, American International Group Inc., reported a 7.7% decline in direct premiums written in 2017, to $868 million, and the second largest, Chubb Ltd., wrote $767 million in premium, a 2.6% decline.