D&O premium has been leading since 2014, but COVID claims may be lagging: AM Best
Last year was the best year for premiums, volume and direct profitability for directors’ and officers’ liability insurers since 2014, with pressure from insurers for moderate to substantial price increases fueling revenue growth. business, according to a report by AM Best Co. on Monday.
But issues, including possibly overdue COVID-19-related D&O claims, remain, according to the report.
Price increases each quarter have been double digits and are expected to remain in 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 have helped to mitigate some of the impact of COVID-19 for individuals and businesses, and delays in legal proceedings have hampered normal insurance claims cycle programs,” the report said. report.
Given that D&O claims related to COVID-19 may be lagging, “the increase in premiums and its impact on the line’s direct profitability may not reflect the true depth and complexity of the challenges that D&O insurers are facing. still faced,” the report said.
Other daunting challenges facing the D&O marketplace include social inflation, which has led to more plaintiff-friendly legal decisions and larger jury decisions; cyberattacks and ransomware; the growth of ad hoc acquisition company litigation, which has increased the cost of A&D insurance; and the focus of regulators on environmental, social and governance factors.
The D&O market is also highly 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 a third of the market, according to the report.