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Survey Report

Insurance Marketplace Realities 2021 – Directors and officers liability

Financial, Executive and Professional Risks (FINEX)

November 18, 2020

Rates, terms and capacity will continue to see upward pressure well into 2021, yet we see signs of activity that could lead to stabilization.

Rate predictions

Rate predictions: Directors and Officers Liability
  Trend Range
Stable risk profiles (modest COVID-19 exposure)
Public company — primary
Increase (Purple triangle pointing up) +20% to +50%
Public company – excess layers
Increase (Purple triangle pointing up) +20% to +70%
Private and not for profit
Increase (Purple triangle pointing up) +10% to +50%
Increase (Purple triangle pointing up) +15% to +40%
Challenged risk profiles
High COVID-19 exposure
Case-by-case basis; large potential increases; may not be enough willing capacity
Challenged industries, e.g., oil
Case-by-case basis; large potential increases; may not be enough willing capacity

Key takeaway

Rates, terms and capacity will continue to see upward pressure well into 2021, but we are seeing signs of activity that could lead to stabilization.

Our unprecedented, pandemic-impacted economic environment hangs over a profitability-challenged Directors and Officers Liability (D&O) market, fueling underwriter concerns about liquidity, uncertainty and systemic risks, and keeping capacity on the sidelines.

  • Liquidity/restructuring/bankruptcy: Underwriters continue to focus on (1) liquidity, (2) industry and (3) responses/resilience to COVID-19.
  • What drives underwriting concerns today? Financial pressure, whether or not heightened by the pandemic, economic shifts, such as lower demand and falling oil prices, and recalibrated pandemic lifestyles and ways of working — these factors mean that old business models may not fit any more.
  • Systemic exposure concerns: Concern over systemic exposures from pandemic-related risk have further narrowed willing capacity.

D&O portfolio adjustments will continue into 2021. This could transition from capacity and excess pricing recalibration to attachment and coverage restrictions.

  • Hard market: The U.S. D&O market is hard, but the London D&O market is notably harder.
  • Some risks are particularly challenged:
    • Non-U.S. parent, U.S. D&O exposure (due to complexities of compliance across jurisdictions, internal controls and varying carrier appetites for U.S. and non-U.S. D&O risks.)
    • Large private and private equity portfolio risks
    • Certain industries: Oil and gas, health care, cryptocurrency, cannabis, retail, travel and hospitality, and higher education
    • Liquidity challenged and pre-restructuring/bankruptcy risks
    • In a normal market, post-restructuring risks may be seen by some carriers as relatively clean risks, but in this environment, they are more often viewed as challenging risks, and willing capacity may be hard to find.
  • Capacity pullbacks are likely to wane: Outside of challenged companies/segments, we may see capacity reductions wane in 2021 as carriers approach targeted limits profiles.
  • Competition: While it is far too early to suggest a change in tide, we have seen a few instances of competition on excess layers, and we are seeing new capacity coming into the market — for now, not much more than a few drops in the bucket, but this could be a harbinger of more to come later in 2021 or into 2022.

D&O insurance has never been more valuable. Growth in D&O perils and losses, while fueled in part by the pandemic environment, are also being driven by long-term shifts in risk drivers, including cultural shifts and social inflation.

  • Securities class actions (SCAs): Frequency trends, looking to end 2020 down slightly year on year, remain at historically high levels. The severity of losses could worsen if we see precipitous stock drops from this year’s highs. We have seen a few SCA filings related to the pandemic, but no wave of new claims yet. Nevertheless, as we get deeper into the pandemic, we expect frequency to rise.
  • Restructuring/bankruptcy/insolvency: The good news is that many recent restructurings have been consensual or largely consensual. From a D&O perspective, a consensual restructuring may present materially less risk, and some carriers can and do take the differences into account. Nevertheless, bankruptcy claims can be the most severe. Companies facing restructuring or bankruptcy should make sure to seek expert D&O insurance advice in advance of any filing, if possible.
  • Derivative claims/Side-A: Mega derivative settlements and unfavorable legal developments have elevated concern over derivative claims. These trends (and our hard market) are hitting Side-A/DIC (non-indemnified loss) portfolios harder than expected. Side-A pricing floors have pressed higher, and for 2021, we may see Side-A pricing significantly recalibrated.
  • Private company D&O: Broad entity coverage is under pressure, as underwriters push back on hard-to-underwrite risks related to cyber, privacy, antitrust, consumer protection, regulations, employment practices and bankruptcy.
  • IPOs: Notwithstanding a few favorable legal decisions, expect high retentions, hard-market pricing and conservative terms to continue for the foreseeable future.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.


Rob Yellen
Executive Vice President, D&O and Fiduciary Liability Product Leader, FINEX

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