Analysts noted that the record-high premiums of the last two years have fallen further due to competition from insurers.
The challenges from a capacity perspective, particularly for public companies seeking larger D&O insurance limits, are no longer such an issue, Gallagher pointed out.
After navigating a tough D&O market, insurers now have aggressive growth targets to meet, analysts say. But a lack of IPOs in 2022 – mainly caused by geopolitical instability and macroeconomic uncertainty – has resulted in low volume of newly listed companies and the premium income that followed.
As a result, this lack of IPOs has created a buoyant environment where the new capacity in the market faces increased competition for the existing pool of public companies. And without historical claims, they are no longer the cheapest.
After a few years of steady price increases, insurers are seeing significant price declines, which is good news for D&O buyers. Sectors such as retail, hospitality and life sciences are those that have seen larger declines, with the latter reporting premium reductions of up to 40%.
Still, not all buyers are seeing price declines, with those in certain sectors or with difficult claims not necessarily benefiting from the same degree of positive change, Gallagher noted.
Sectors that are still subject to more stringent conditions include logistics and infrastructure due to the major issues affecting this industry, and natural resources are less attractive to insurers due to the environmental and social impacts of many companies in this industry.
Additionally, tech companies have suffered the brunt of D&O lawsuits and are still viewed as somewhat risky, according to analysts.
When pricing risk, DE&I, ESG and the firm’s approach to cyber risk management are increasingly the focus of insurers when pricing risk. As a result of the savings at D&O, Gallagher believes there will likely be an increase in purchases of ancillary businesses such as EPL.
Gallagher said: “As D&O is a long-term insurance line of business, it’s also important to note that maintaining a sustainable approach to underwriting and pricing is critical as we move forward. Despite the market slowdown, it remains a challenging environment for brokers as most deals are remarketed due to this increased competition.”
She concluded, “A healthier market and more supply will have a positive impact on the overall terms of insurance programs. Communication between retailers, customers and the marketplace will continue to be critical to keep this transition fluid and collectively move towards a more stable marketplace in 2023 and beyond.”
Source: UK Daily News
