This update analyses our observations of the current market conditions for Directors’ and Officers’ insurance and the impact this has on board directors, non-executive directors and insurance buyers and is based on our observations of the market with our WTW clients and not a whole of market review. For ease of understanding, the percentages have been presented as rounded figures.
Competition between insurers in London and other regions has been strong in the latter part of 2022 and first half of 2023, which put pressure on the London D&O market to reduce rates. Perhaps also influenced by lower claims notifications and US Securities Class Actions, this has led to significant softening in rates in Q2 2023.
In Q2 2023, most of our clients saw decreases in their renewals: 83% of clients saw their primary layer renew with a decrease on last year’s premium whilst 89% saw their excess layers renew with a decrease (further detail can be found in chart 7 in Appendix I).
Insurers have also continued to soften policy terms and are increasingly willing to underwrite business using WTW’s proprietary wording (DARCstar), a new version of which has just been launched this year to incorporate the latest improvements.
Following a period of significant decreases in the volume of claim and circumstance notifications between 2020 to 2022, notifications in H1 2023 have shown a marked increase compared with 2022 (see chart 3 below).
According to The Stanford Law School/Cornerstone’s Securities Class Action Clearinghouse (http://securities.stanford.edu/charts.html), US Securities Class Actions for 2021 and 2022 were down from the historic highs of 2017-2020, with 2022 being even lower than 2021 (and the lowest level since 2014). If the securities claims made so far in 2023 are annualised, then it seems likely they will hit the levels of 2021 and be up slightly from 2022 (see chart 4 below).
Looking forward, we continue to see strong competition in the GB D&O insurance market, and we expect this trend to continue for the rest of 2023. Q3 has seen “any one claim” limits returning to the D&O market, with insurers offering this for some UK public and private companies, often for little or no additional premium.
DARCstar 2023 and DARCstar Private Equity 2023 have now been released, with CRIMEstar 2023 and a new Side A DIC facility due to launch imminently. We are also excited to be working on our next Directors’ and Officers’ Liability Survey which will be launching in October 2023.
Chart
Source: Data from WTW FINEX FINMAR client placements, sourced as 11 August 2023, see Appendix II for further information
*You may notice that this graph looks different to our Q1 update. Unfortunately, it is that the data that was included in chart in our Q1 update was based on SME clients and not ABC renewals. This has been corrected in this report.
Chart 2
Source: Data from WTW FINEX FINMAR client placements, sourced as 11 August 2023, see Appendix II for further information
After a period of significant decreases in notifications between 2020 to 2022, notifications in H1 2023 have showed a marked increase from the level in 2022 over the same period.
Chart 3
Source: WTW client notifications from GB placements only, between 1 January 2007 to 30 June 2023
Securities Class Actions filings through H1 2023 reflect year-over-year increases, annualised at 228 filings, which would be 10% higher than 2022. In contrast, for cases settled in H1 2023, the average settlement was USD 21 million, a 47% decrease over the 2022 inflation-adjusted average settlement of USD 39 million . Nevertheless, the median settlement was USD 16 million, a USD 3 million increase over 2022.
Chart 4
Cornerstone Research, Securities Class Action Filings: 2022 Year in Review. For 2023 filing figures year-to-date, see Cornerstone Research, Securities Class Action Filings, 2023 Midyear Assessment.
We have launched our report on our latest Directors’ and Officers’ Liability Survey in collaboration with international law firm, Clyde & Co LLP. With results from 40 countries in the world, this report provides invaluable insight into differing attitudes to risk across different regions, industries and company sizes.
For more information, see the articles to the right of this page which look at some of these risks in more detail.
Chart 5
Data from WTW FINEX FINMAR client placements, sourced as 11 August 2023, see Appendix II for further information
Chart 6
Data from WTW FINEX FINMAR client placements, sourced as 11 August 2023, see Appendix II for further information
Chart 7
Data from WTW FINEX FINMAR client placements, sourced as 11 August 2023, see Appendix II for further information
| Min | Max | Notes | |
|---|---|---|---|
| Rate on Line | 0.01% Rate on Line | No max | Rate on Line is calculated by dividing the premium by the limit of liability that is being purchased and expressing that as a percentage. This shows the proportional cost of the limit of liability being purchased by each client. |
| Rate on Line change | 0.01% Rate on Line | No max | We are comparing the Rate on Line paid last year to the Rate on Line paid this year for a given client at renewal. |
Figures in this report are based on WTW FINEX FINMAR client placements, sourced as 11 August 2023, and WTW client notifications from GB placements only, between 1 January 2007 to 30 June 2023. They will be updated periodically to reflect additional records. Graphs in this report show the moving average between 2020 and Q2 2023.
An ABC placement is one which includes cover for Side A (D&O non-indemnified loss), Side B (D&O indemnified loss) and Side C (Company Securities Claims).
