Pandemic Stokes Fire of Rising D&O Insurance Premiums

# Insurance

# Risk Management

Corporates see no relief as insurers take a hard line on renewals amid rising fears of COVID litigation.

Premiums for directors and officers (D&O) insurance are surging, a pain point discussed at several NeuGroup meetings this spring, including the Tech20 Treasurers’ Peer Group and the Life Sciences Treasurers’ Peer Group.

Premiums were already on the rise at the beginning of the year and now, amid the pandemic, they continue to rise. That’s in part because COVID-19-related D&O claims are already being filed in US courts.

Big percentage increases. During Tech20’s recent virtual meeting, members said they were seeing premiums rise by between 25% and 70%. According to insurance broker Marsh, rates on D&O policies in the US rose 44% on average in the first quarter from the same period a year ago. Marsh reported that 95% of its clients experienced an increase.

“The last few weeks have been bad,” said one member, adding that in some cases insurers themselves “have just walked away.” Another member was quoted an increase in the 30% range and considered himself lucky. “If someone gives you something good, take it.”

This advice was too late for one member. “We were told of a 30-35% [increase] in February, but now we’re told between 50%-70%,” she said.

At the NeuGroup for treasurers of retailers, one member’s D&O renewal experience involved “premium pressure on the lead portion, but more on the excess layers, where the premium pressure was outrageous.”

Reckoning and retention. After a “historic underpricing” of D&O premiums in London, the market is now witnessing a serious course correction, according to an account executive from Aon Risk Solutions who spoke at the life sciences meeting.

This reckoning, along with the pandemic, means the London market is not offering capacity and premiums are surging, he said.

Another takeaway from that meeting: higher retentions by corporates are not leading to significant premium relief.

Some members of the life sciences group reported having difficulty getting competing quotes for D&O coverage.

Litigation nation. At the LSTPG meeting, one insurance expert presenting noted that he was starting to see an increase in “litigation over the pandemic,” including lawsuits in the tourism sector. No one is immune,” he said, and treasurers should “anticipate seeing more and more [litigation].”

With this in mind, some treasures noted that underwriters were adding a pandemic or virus exclusion to policies going forward; current policies either don’t have the exclusion or are vague.

Better beyond D&O. The good news, according to Tech20 members, is that outside of some coverage areas like D&O and property, there haven’t been huge increases. “Coverage has remained stable,” said one Tech20 member, who added that there was “no constriction in terms and conditions.”