London Market D&O capacity valve stuck on open: Lockton

The London market and Lloyd's names have pressed ever further into the D&O market, increasingly quoting primary layers, offering multi-year deals and going along with a broker-driven return to major market facilities for volume business as the softening rolls on, analysts at global re/insurance broker Lockton have claimed. 

2023 proved to be the year of expanding capacity, despite warnings on the softening line of business from Lloyd's oversight authorities and others. New players combined with new access channels spelled increased flows, Lockton claimed.  

Lockton sees new and eased capacity with incumbent insurers “agreeing premium reductions to maintain their positions and offer competitive terms for new business”. 

New entrants to London Market D&O included Westfield, Kayzen, and Hamilton, while relatively new players like IQUW and Inigo broadened their D&O appetite beyond initial niches while follow-only facility Ki added D&O to its palette. 

“Individually, none of these new entrants will disrupt an already crowded and competitive marketplace. However, combined there will be as much or more D&O capacity in the market in 2024 than there was in 2019, before the latest hard market cycle,” analysts wrote. 

For existing D&L players, a “major catalyst” in the capacity calculations came from broker-driven major market facilities for volume business, helping also to water down terms and conditions.

“Insurers looking to gain market share quickly are eager to support these major broker facilities,” Lockton claimed. 

The competition from increased market is doing more than just pushing down rates. Line sizes, tenors, terms and more may all be on the table 

“Insurers have been keen to tie in clients by offering multiyear D&O programmes, a trend that is likely to continue throughout 2024 and potentially beyond,” Lockton authors said of a move to longer terms.

Lockton likewise cites a “greater number of insurers willing to quote primary layers,” including cases of insurers behaving “opportunistically” by “unsolicited quotations for primary and underlying layers.”

Line sizes are said to be increasing, with “most insurers” returning to £10 million and other stretching as high as £15 million as a new maximum deployed capacity, a palpable relief for insureds after prior caps nearer £5 million, Lockton added. 

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