OLDWICK, N.J.–(BUSINESS WIRE)–While the U.S. directors and officers (D&O) insurance market saw a 40% increase in direct premiums written in 2020, the segment also experienced a 32% rise in direct losses incurred, according to a new AM Best report.
The new Best’s Market Segment Report, titled, “D&O: A Very Cautious Seller’s Market,” notes how carriers in this market still are struggling with substantial losses stemming from years of relatively soft premiums. Other causes for the market’s adverse performance include:
- Adverse litigation and settlement trends, including higher jury awards;
- The rise in securities class action suits, which doubled between 2015 and 2017 before reaching a high of 427 in 2019;
- A wide range of emerging risks, including environmental, social and governance concerns for boards; and
- The heightened risk of bankruptcies, which is further testing insurance companies and their ability to develop products and provide adequate coverage for a fair price.
The loss ratio deterioration in 2020, despite the increased premium volume, illustrates the extent of loss frequency and loss severity. According to the report, companies entered 2021 with fundamental underwriting conditions still in a substandard state. COVID-19-driven court closures and uncertainty about re-opening also had
a material effect on the legal environment in 2020, inhibiting or at least delaying cases from progressing through the legal system. While this provided a…