Rachelle Best is president of RT ProExec, a unit of RT Specialty, and is based in Bloomfield, Connecticut. She began her career in the industry as an underwriter at Chubb Ltd. in 2003. In 2009, she became a broker for Oakbridge Insurance Services, which was acquired by RT Specialty in 2010. Ms. Best recently spoke with Business Insurance reporter Shane Dilworth about the current status of the directors and officers liability market and what the future may hold. 

How would you characterize the current state of the D&O market?
We're continuing to see a lot of capacity in this space from both a primary and excess standpoint, which is a bit different than what we were seeing in 2020 and 2021. During that time, we were experiencing a hard market with less capacity available. We then saw an influx of new carriers and capacity enter the market as D&O rates increased and became attractive to new entrants. So, carriers that weren't participating in this space, or weren't participating in it from a primary perspective, decided they wanted to start underwriting D&O. Since that point, we have seen an abundance of capacity in the D&O space.

What's driving the market at the moment?

It's a supply and demand issue. Until there is a shift in either the capacity that's available or something that could change the dynamics – such as an uptick in IPO activity  –  I’m not sure we will see the market change significantly. I also think some of this will depend on securities litigation and the costs associated with that as well.

What emerging exposures are developing in D&O?

AI and the regulatory risk associated with it. Also, disclosure issues such as whether investors were fully informed of the risks and whether the company is overstating or misleading investors as to its AI capabilities. Another emerging exposure is cybersecurity as it relates to the new SEC disclosure guidelines that took effect in the latter half of 2023. Under the new rules, a company is required to disclose a material incident within four days of it occurring. What’s interesting is that in a couple of situations, the hackers actually used the new disclosure requirement against the company and reported them to the SEC. There are also potentially some disclosure concerns around cybersecurity risk itself and the procedures that were in place to prevent it. Geopolitical risk is also an emerging issue as we could continue to see supply chain disruptions, trade tensions and the regulatory risk or issues associated with that. It's an interesting year with the election looming.

What’s your market outlook for the next 12 months?

We're continuing to see a soft market in this space in 2024. Where it goes the next 12 months really depends on several factors, which include securities litigation and the associated costs as well as the impact the litigation and costs have on the insurers’ loss ratios. Another factor that could impact the market is changes in capacity. If we were to see some insurers decide to exit this space or look to change their underwriting philosophy specific to D&O coverage, that could potentially have an impact on the market. Lastly, an increase in IPO and deSPAC activity would give underwriters more to compete over, so there's potential for that to impact the market as well.