5 D&O Insurance Market Trends for Q4 and Beyond

Coming down from the peak of a hard market for most of the year, we are now seeing a significant shift in directors and officers (D&O) insurance market conditions with broader terms, better pricing and greater capacity. According to the latest Willis Towers Watson (WTW) D&O insurance market survey report, we can expect these favorable market conditions to continue through the end of this year and into 2023.

The following are 5 key takeaways from the WTW report that can help you better understand the outlook of the D&O liability insurance market and the impact it could have on your business.

1. Capacity & Rates

Carrier capacity has become more widely available than it was at the first of the year and is having a buyer-friendly impact on D&O market conditions, including pricing. In general, preferred risks and sectors will continue to benefit from greater carrier writing capacity and lower rates. However, accounts with multiple claims and more risk-challenged sectors are likely to experience challenges associated with hard-market conditions.

2. Underwriting

In addition to considering specific risk factors associated with certain industries, D&O underwriters will continue to evaluate new business and renewals based on financial strength, environmental, social and governance (ESG) concerns, claims history (including event-driven claims), COVID-19 resilience, regulatory uncertainty, loss-cost increases, cybersecurity protocols, and systemic exposures.

3. Exposures

A key business exposure that companies need to address is the ongoing issue of environmental, social and governance (ESG), with an emphasis on inclusion and diversity (I&D). Board diversity and corporate I&D protocols will remain critical to D&O risks, with heightened exposures possibly resulting in increased underwriter scrutiny into ESG practices. Businesses must be proactive in evaluating the adequacy of company disclosures that could create shareholder and regulatory exposures if left unchecked. 

4. Challenged Accounts & Industries

The increase in initial public offerings and special purpose acquisition companies, along with SPAC-related security lawsuits, has sparked underwriting concerns that could impact new and renewal business terms and conditions for these companies. Other accounts that could raise concerns for underwriting include those that are liquidity challenged and pre-restructuring/bankruptcy risks, as well as industries such oil and gas, health care, life sciences, higher education, cryptocurrency, cannabis, retail (private), restaurants (private) and sports/entertainment (private).

5. Excess D&O

The WTW report shows that excess D&O insurance markets have begun to favorably recalibrate increased limit factors for larger risks. However, for more risk-challenged accounts, we could see the opposite occur with higher excess layer pricing.

If you have a business in need of D&O insurance, contact the experts at Oakwood D&O. We have over 15 years of experience specializing in all aspects of management liability, with an ardent focus on D&O insurance.

To learn more, get in touch! Email Eli Solomon, CEO, at eli@oakwooddno.com or call 323-686-7519. You can also follow Oakwood D&O on LinkedIn