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D&O marketplace sees increased capacity


The management liability marketplace is facing significant challenges related to the COVID-19 pandemic but will benefit from the increased capacity entering the market, a broker executive says.

Even before the pandemic, the industry faced several challenges, including an increase in class action derivative lawsuits and anticipated hikes in premiums and retentions, said Christine Williams, New York-based CEO, financial services group, at Aon PLC.

She spoke during the Minneapolis-based Professional Liability Underwriting Society’s annual directors and officers symposium, which was held remotely last week.

“We started out 2020 with a set of challenges” that was only furthered with COVID-19’s impact starting in March, Ms. Williams said.

Meanwhile, there has been a surge of activity related to special purpose acquisition companies, or SPACs, which has led to about 40 related lawsuits, she said. 

There may also be employment practices liability claims related to workplace safety, reductions in force, having people work remotely and returning employees to the workplace, she said.

There have been, as well, lawsuits filed in connection with allegedly excessive fiduciary fees, and an increase in ransomware. And while the number of securities class actions was down slightly last year, they remained at high levels, Ms. Williams said.

Four months into 2021, “we’re continuing to see portfolio adjustments overall out of the gate,” and rates have continued to experience upward pressure, she said.

However, there have been about a dozen new entrants into the management liability market in the United States and London, Ms. Williams said. “It’s early days, but I think they will be able to provide some ample capacity,” she said. 

Ms. Williams also referred to the movement of personnel in the industry. “I don’t remember where we saw so much movement” both among brokers and insurers, she said. “This will certainly lead to competition” in the excess layers, she said.

John Doyle, president and CEO of Marsh LLC, said during a separate session that he saw signs of D&O pricing moderating in the first quarter, which is likely to continue.

Capital is moving more quickly than at any point in his career, he said, “and it will seek out pools of profit, so things tend to level off fairly quickly.”

During a session on new market entrants, there was discussion as to why so many are in London or Bermuda rather than the United States.

In the United Kingdom, entities have the ability to get up to speed fast, and freedom of rate and form, while in the U.S., new markets are forced to go through different states, involving many layers “and there is a lot of work that has to be done to get the entity’s paper ready to go,” said Jack Kuhn, CEO, insurance, at Vantage Risk Ltd. in Berkeley Heights, New Jersey, whose parent company is Bermuda-based.

Another session focused on contingent liability insurance, which provides coverage for security class actions that survive motions to dismiss. “This kind of product helps even the playing field,” said Paul R. Bessette, co-chair of King & Spalding LLP’s corporate and securities litigation practice in Austin, Texas.

During a session on international D&O insurance, Chris Warrior, London-based head of commercial management liability UK for Berkshire Hathaway Specialty Insurance Co., said the market is at a crossroads, with London insurers stepping up with appetite to provide new capacity.





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