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Survey Report

Insurance Marketplace Realities 2022 – Directors and officers liability

November 15, 2021

Rates, retentions and terms continue to see pressure, but capacity inflow has helped decelerate increases.
Financial, Executive and Professional Risks (FINEX)

Rate predictions

Rate predictions: Directors and Officers Liability
  Trend Range
Stable risk profiles    
Public company – primary Neutral increase (yellow line, purple triangle pointing up) Flat to +25%
Public company – excess layers Neutral increase (yellow line, purple triangle pointing up) Flat to +20%
Private and not for profit - overall Increase (Purple triangle pointing up) +5% to +40%
Side-A/DIC Case-by-case, with minimums impacting most risks  
Challenged risk profiles    
Non-U.S. parent, U.S. exposures Case-by-case basis; large potential rate and retention increases  
IPOs and SPACs Case-by-case basis; large potential rate and retention increases  
Challenged industries/companies, e.g., oil and gas, healthcare, life sciences, higher education Case-by-case basis; large potential rate and retention increases  

Key takeaway

Rates, retentions and terms continue to see pressure, but capacity inflow has helped decelerate increases.

The economic environment emerging directly and indirectly from the pandemic continues to impact a profitability-challenged directors and officers (D&O) liability market, fueling underwriter concerns about business re-openings and broader systemic risks; however, new excess capacity has helped offset the impact and stabilize the marketplace.

  • Broader market conditions remain challenging, but rate increases are expected to moderate into 2022.
    • Insurers managed their capacity and corrected rate in 2020 and 2021, but many insurers believe the product remains underpriced.
    • Offsetting these challenges is new excess capacity that has yielded a moderation of rate increases versus peak increases we saw in the third quarter of 2020. This capacity inflow has led to additional buyer leverage and an enhanced ability to fill capacity holes.
    • A tale of two markets persists: More favorable risks are the initial beneficiaries of new capacity. More challenged risks continue to experience hard market challenges.
  • Uncertainty: Economic recovery in the face of a lingering pandemic has begun; however, mutated virus strains and social/political tensions around health and safety measures continue to present issues over the timing and pace of business re-openings and the resurgence of employment and economic growth.
  • D&O underwriter focus: Financial strength (especially liquidity); industry; claim history; COVID-19 resilience; environmental, social and governance (ESG). Additional concerns include financial pressures, pandemic impact, antitrust allegations, regulatory uncertainty, loss-cost escalation, cyber and privacy, social inflation, event-driven claims and systemic exposures.
  • Initial public offerings (IPOs) and special purpose acquisition companies (SPACs): SEC statements on the accounting treatment of SPAC warrants slowed activity around SPAC formations and follow-on business combinations in the second and third quarter of 2021. Nevertheless, the sustained growth in traditional public offerings, as well as ongoing SPAC-related activity, continues to manifest in heightened underwriter uncertainty. We anticipate underwriter scrutiny, high retentions, hard-market pricing and conservative terms for the foreseeable future. Conferring with D&O coverage specialists should be a critical part of any IPO, SPAC and de-SPAC transaction.
  • Private and non-profit companies: Last year’s accelerated rate increases have levelled off, transitioning into the tale of two markets. The contrast in renewals for stable risk profiles and industries and high-risk profiles and challenged industries is notable. Changes in market conditions can occur quickly.
    • Primary: Insureds with low and stable risk profiles are seeing enhanced competition, even flat renewals or decreases in select instances, with the tradeoff being higher retentions. The market for high and/or distressed risk profiles remains challenging.
    • Excess: For larger risks, excess markets have recalibrated increased limit factors (ILFs). For challenging risks, inverted pricing may occur, where higher excess layer pricing may exceed those layers beneath it.
    • Retentions: Carriers continue to press for higher retentions. Even for smaller risks, minimum retentions are being scrutinized and regularly increased.
    • Conservative deployment: The discipline demonstrated by leading insurers has been taken up broadly and for the most part consistently across D&O markets.
    • New capacity has been hard to find: Except for preferred risks, finding new capacity can be particularly challenging. Many carriers are not willing to deploy capacity, even for additional premium.
  • Side A: Predictions on across-the-board rate changes for Side A placements remain less reliable. Instead, we continue to see lead Side A minimum premiums, regardless of expiring rate. Pricing changes may, therefore, be more or less severe depending on the insured’s expiring premium.

Underwriting: D&O portfolio adjustments will continue into 2022.

  • Excess pricing recalibration has fallen off, a trend we expect to continue into 2022.
  • The tightening of terms we saw in the first half of 2021 has moderated and is expected to continue moderating into 2022.
  • Some buyers will be particularly challenged.
    • Non-U.S. parent, U.S. D&O exposures: Complexities of compliance across jurisdictions, internal controls and varying carrier appetites for U.S. and non-U.S. D&O risks
    • SPACs: Slowed activity around SPAC formation and de-SPAC business combinations, but remaining heightened risk and underwriter scrutiny
    • Higher risk industries: Oil and gas, healthcare, life sciences, cryptocurrency, cannabis, retail, travel and hospitality, and higher education
    • Liquidity challenged and pre-restructuring/bankruptcy risks

Several trends and exposures bear watching.

  • Securities class actions: The frequency of federal and state securities class action filings was down 25% in the first half of 2021 over the second half of 2020 which, prorated, would reflect the fewest annual filings since 2015. Fewer M&A-related class actions accounted for much of overall decrease. In the first half of 2021, securities class action settlements totaled $2.32 billion, an 11.5% increase over the same period in 2020; however, the average settlement value in the same period ($39.3 million) was almost 17% lower year-on-year ($47.3 million first half of 2020).
  • Duty of oversight claims: In shareholder derivative lawsuits brought in Delaware alleging that directors breached their duty of oversight, plaintiffs are surviving motions to dismiss with more regularity, despite high pleading standards under Delaware law. It is possible that, rather than revealing a weakening of the pleading standards, that plaintiffs may be making effective use of Delaware General Corporation Law section 220 “books and records demands” as a pre-litigation discovery tool. The plaintiffs’ success in overcoming the motions may be driven by evidence secured through these statutory demands.
  • IPOs, SPACs: IPO filings have increased significantly in 2021, with more than 700 filings through August alone. More than half of filings, 419, were SPAC IPOs. Litigation frequency around SPACs and business combinations (de-SPACs) remains relatively low but has accelerated significantly on a percentage basis in 2021 over 2020. Plaintiffs’ firms forming task forces to investigate potential SPAC and business combination claims also enhances risk.
  • Restructuring/bankruptcy/insolvency: Chapter 11 filings in the first half of 2021 trended below historical averages and particularly below increased filing levels in 2020 following the crises created by the COVID-19 pandemic (Reorg Research, Inc., First Day by Reorg: 2021 Midyear Review).
  • Nevertheless, bankruptcy claims, which impact both private and public companies, can be among the most severe, and with economic uncertainties surrounding emerging coronavirus variants and public health response measures, it is difficult to discern whether the pandemic is entirely behind us. Companies facing restructuring or bankruptcy should seek expert D&O insurance advice in advance of any filing, where possible, as policy wordings unique to the risk can impact the extent of policy recovery.
  • ESG, inclusion & diversity (I&D): Organizations face increasing pressures from regulators and investors to address ESG concerns from operational and investment perspectives. SEC-mandated climate risk disclosures create both regulatory and shareholder exposures. In addition, mandatory board diversity has been the subject of legislation and proposed legislation in several U.S. states, and both board diversity and corporate I&D programs have been the subject of shareholder litigation against several high-profile companies. The heightened exposures have resulted in increased underwriter scrutiny into ESG practices more broadly.
  • Influence of social media on stock value fluctuation: The influence of social media in the manipulation of stock valuation and trading emerged like a tidal wave in early 2021, leading to swift and significant volatility in the stock prices of several high-profile companies. The phenomenon did not develop into a trend through the rest of the year, but we continue to monitor the potential impact of social media campaigns on stock value fluctuation and D&O risk.

United State Supreme Court decisions will continue to impact the D&O liability landscape.

  • Shareholder class certification: (Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System): The Supreme Court sided with Goldman Sachs in allowing the lower court to consider whether alleged misrepresentations were merely generic statements on which market reliance was unlikely — and to do so at the earlier class certification phase of litigation. The Court held that such considerations should be allowed, even though the factual issue of materiality is still reserved for the later merits stage of litigation.
  • The decision is viewed as a win for defendants in securities litigation; however, by not allowing for the materiality of statements to be determined more broadly at the class certification stage, and by not addressing other related issues, the impact of the Goldman Sachs case may be more limited than defendants may have hoped.


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.


D&O Liability Product Leader
FINEX North America

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