XL Catlin’s most recent white paper; “Show me the money!” examines the assumption that Directors & Officers premiums will, on average, be forced to increase 3.5 times to become profitable again.
Why is this the case?
| The primary reason is the drastic increase in the frequency of new Securities Class Action lawsuits over the last few years. From 2000 to 2012 there was an average of just over two new securities class actions filed per year. Over the past 4 years that has increased to almost eight new filings per year, which has translated to a current estimated loss ratio (gross claims paid versus premiums collected) of over 200%. | A significant increase when one understands that the insurance industry tries to operate at a level of approximately 60%. |
So, are premiums likely to increase this dramatically for our clients?
| Most public companies would be experiencing some level of increase on their D&O insurance renewal. We believe it is a two-tier market for Public Company D&O Insurance — the small juniors who don’t typically purchase entity coverage (Side C) and only insure the D’s & O’s, versus the mid-to-large Public Companies that purchase large amounts of entity coverage (Side C).
As most of the class actions are targeted at the larger market cap companies and the Side C insurance, this is the dominant area experiencing the poor loss ratio and drastic premium increases | Overall, we believe the D&O insurance market will continue to harden with premiums increasing, coverage tightening and insurers becoming more stringent on their underwriting. It is more important than ever to review and understand what you’re buying and what is and isn’t covered on your D&O insurance.
If you would like to find out more, the below article from XL Catlin provides an in-depth outline on these announcements:
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We are a specialist insurance brokerage with an emphasis on adding value to our clients by helping them make an informed decision. Our approach combines that of an insurance broker and consultant, where we focus on providing expert advice to our clients while customising their insurance program and risk management solutions.
Since starting in 2013, KBI is constantly growing and becoming a leader in the Australian market. Our primary point of difference is that we don’t try to be all things to all people. We work in niche areas, where we can tailor an offering, advice and broker support to meet the specific area’s needs.
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