Globally, the Directors & Officers (D&O) insurance market is experiencing clear and consistent signs of softening, with flat to decreasing premiums and significant increases in capacity, after three years of a hard market. This trend is expected to continue into 2023.
However, the prospects of a recession in early 2023 may dampen the softening market as recessionary conditions can lead to increased litigation. Buyers should act now to capitalize on this evolving market.
D&O Conditions from a Regional Perspective
New markets, reduced IPOs, reduced securities litigation, a decline in claim frequency and better underwriting results have led to a more competitive D&O market. For the short term, that has resulted in better pricing, broader terms, and greater capacity but there are differences within the regions.
U.S.: Average price per million decreased 19.9 percent compared to the prior-year quarter: price per million, adjusted for certain items, decreased 14.7 percent; price per million for clients that renewed in both Q3 2022 and Q3 2021 decreased 15.3 percent; 46 percent of primary policies renewing with the same limit and deductible experienced a price decrease; 16 percent had a price increase. Overall price change for primary policies renewing with the same limit and deductible was down 4.0 percent.1
Canada: Capacity continues to expand and pricing is moderating for public and private companies on a case-by-case basis.2
The largest premium reductions have been seen across European and North American accounts. North American accounts saw a 12 percent reduction in sides ABC rates in the second quarter 2022. This is almost double the second largest reduction of 6.4 percent seen in the UK region. From a rate-on-line perspective, APAC and North America were standouts with rates dropping an average of 16 percent for APAC and 12 percent for North America in Q2 2022 compared to 2021.
Rates are softening on excess layers as new capacity enters the market. However, primary layers remain stable with carriers seeking 5-10 percent rate increases tied to inflation.