D&O premium tops since 2014, but COVID claims may lag: A.M. Best

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.