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Directors and officers liability insurance rates will likely more than double in the wake of the COVID-19 pandemic as insurers respond to increased shareholder litigation over the past three years and future litigation over coronavirus-related exposures, according to a report by A.M. Best Co. Inc.
The Oldwick, New Jersey-based rating agency noted in the report issued Wednesday that rates have already increased significantly in 2020, citing a Marsh LLC report that D&O rates rose 44% in the first quarter.
“We can expect triple-digit rate increases in a post-COVID world, as insurers respond to legacy issues such as increased litigation, litigation financing, and keeping up with emerging claims and litigation due to COVID-19,” Best said in its report.
Securities class-action lawsuits have been at “elevated levels” since 2017, and third-party funding of legal cases, where litigation financing firms provide advances to plaintiffs in return for a share of any settlement, is becoming increasingly common, the report said.
COVID-19 claims will likely increase from industries hardest hit by the consequences of the pandemic, such as travel and leisure, Best said. In addition, claims may arise from lawsuits alleging inadequate disclosure by businesses and an increase in bankruptcies, the report said.
More insurance and risk management news on the coronavirus crisis here.