Press Release - JANUARY 29, 2019

Best’s Market Segment Report: Emerging Risks, Greater Complexity Challenge Directors and Officers Insurers

 David Blades, CPCU
Associate Director, Industry Research and Analytics
+1 908 439 2200, ext. 5422

Sridhar Manyem
Director, Industry Research and Analytics
+1 908 439 2200, ext. 5612

Christopher Sharkey
Manager, Public Relations
(908) 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
(908) 439 2200, ext. 5644


Profitability in the U.S. directors and officers liability (D&O) insurance market remains pressured as claims trends continue to be unfavorable amid a pricing environment that has not kept up with increasingly complex risks, according to a new AM Best report.

According to the Best’s Market Segment Report, “Emerging Risks and Greater Complexity Challenge D&O Insurers,” premiums have remained relatively flat between 2014 and 2018 at approximately $6.5 billion while the calendar-year loss ratio rose to 55.5% from 49.3%. Other major obstacles carriers are facing include intense competition and emerging trends such as the #MeToo movement, cyber and the proliferation of class action lawsuits.

Despite the challenges that have created a landscape that is hard to price and underwrite, supply has not been a constraint in the D&O segment, as carriers are continuing to invest capacity in this segment due to a softening catastrophe market. However, the report notes that relatively robust price increases in 2012-2014 have given way to minimal rate increases since, and AM Best believes capacity may constrain any large market correction.

A main driver of the worsening claims frequency trend is the increase in Federal Securities Class Action litigation. IPOs in particular have consistently been a target for class action suits and have thus been quite a challenge for D&O insurance providers. Considering the stock market’s volatility in the latter half of 2018 that erased gains from earlier in the year, AM Best believes a further spike in lawsuits at the beginning of 2019 is possible.

The allegations of sexual misconduct have had a tremendous impact on the speed, strength and breadth of the #MeToo movement. The result has been a growing number of lawsuits alleging corporate misconduct, leading to shareholder derivative actions. Fiduciary duties related to data privacy and cyber-security also could cause increased scrutiny of terms and conditions of D&O policies to identify explicit coverage and exclusion terms.

As the competitive market for D&O coverage shifts in response to loss frequency and severity developments, and new risks requiring revised strategies emerge, insurers, particularly those with a sizable amount of market capacity and appropriate risk management capabilities, may look to re-orient coverage, pricing, reinsurance strategies and relationships to maintain their business profile without compromising on operating performance.

To access the full copy of this market segment report, please visit .

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.