D&O making losses after number of carriers escalates

The Directors and Officers (D&O) market is losing insurers money and needs to be realigned after the number of carriers shot up over the last decade, said a leading industry player.

Adrian Jenner, head of D&O and cyber at Zurich Insurance, was downbeat as he spoke at the Clyde & Co Global Financial Institutions and D&O conference in London this week.

“No one is making a profit from D&O insurance which historically was the darling. I talk to my peers on a regular basis confidentially. We’re all losing money, ” Jenner told Intelligent Insurer in an interview.

Jenner was part of a panel that consisted mainly of lawyers from Clyde & co, including partners based in its offices in Australia, the United States, Canada, and London. Most of them were also pessimistic on D&O.

Jenner told the conference that he was “depressed” by the situation. He said that 10 years ago you had a global market place and “it was the preserve of 10-12 carriers , now it’s 40+.”

He added: ”It was the few making claims. Now it’s the many.”

Jenner said the market was coming out of the eye of the storm but added: ”We’re not headed for a sandy beach”.

He said rates would have to rise and there would have to be more dialogue with clients. “We have to ask them: “What do you want us to be here for? We’ve been paying the claims, giving the benefit of the doubt. But we can’t give everybody the benefit of the doubt.”

He said the industry had not collected enough premiums to pay the claims. “Looking at what clients were paying 10 years ago, we’re doing it for 50 percent less”.

Jenner said clients had broader coverage, and higher limits on payouts. He said it was “killing us”.

Increased regulation and litigation were also tipping the balance against insurers. He said the market was misaligned and there was not an equitable relationship between insurers and clients.

A recent ruling in the United States was an example of the increased scope of D&O insurance in merger and acquisitions. A Delaware court ruled that a shareholder appraisal action, where an investor is looking to have the effect of a merger/acquisition assessed , could trigger D&O insurance, in respect of legal costs.

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