D&O premium tops since 2014, but COVID claims may lag: A.M. Best
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Last year was the best year for directors and officers liability insurers’ premium, volume and direct profitability since 2014, with insurers’ push for moderate to substantial price hikes fueling top-line growth, says a report issued by A.M. Best Co. on Monday.
But issues including possibly lagging COVID-19-related D&O claims remain, the report says.
Price increases in each quarter were more than 10%, and are expected to remain at or near double digits this year, according to the report, “D&O Insurance: Positive 2021 Results, but the Segment Still Faces Formidable Challenges.”
“Monetary and fiscal measures helped mitigate some of the impact of COVID-19 for both individuals and businesses, and delays in court proceedings impeded the programs of the normal insurance claim cycle,” the report says.
Because COVID-19-related D&O claims may be lagging, “the increase in premium and its impact on the line’s direct profitability may not reflect the actual depth and complexity of the challenges D&O insurers still face,” the report says.
Other formidable challenges facing the D&O market include social inflation, which has led to more plaintiff-friendly legal decisions and larger jury awards; cyber and ransomware attacks; the growth in special purpose acquisition companies’ litigation, which has raised the D&O insurance’s cost; and regulators’ focus on environmental, social and governance factors.
The D&O market is also very concentrated, with the three largest D&O writers – Axa XL, a division of Axa SA; Chubb Ltd.; and American International Group Inc. – accounting for about one-third of the market, according to the report.
