Canadian Underwriter

What might cause the softening D&O market to stall?

March 8, 2023   by Philip Porado

Corporate boardroom in chaos

Print this page Share

Hard markets may come and go, but they seemed to stick around longer for Directors and Officers (D&O) coverage than for some other P&C industry segments.

As of last fall, though, D&O availability and affordability have been improving. After several years in a hard market that restricted capacity and toughened pricing, a transition to softening began in the second half of 2022.

“Even though there’s a lot of underwriting concern, the thing that is also really important to understand is the market dynamics we’re in right now,” said Catherine Lanctot, senior vice president and national leader, financial services group, Aon. “Capacity is increasing and deductibles are moderating.

“I like to call this the Hunger Games in the sense that, contrary to the [larger] P&C market, the D&O market has been transitioning to a soft market over the last couple of months.”

She said brokers are “seeing interesting premium decreases” fuelled in part by carrier growth goals in addition to new markets coming into Canada.

Still, while markets are more stable than they’ve been over the last three years, Dane Hambrook, head of specialty products at Zurich warned that challenges remain.

“There are certainly tailwinds,” he said. “But headwinds are out there, whether its geopolitical winds, macro winds or the ESG-related sustainability issues.”

In some cases, brokers may now be seeing more multi-year deals (and, in some cases, going from two-year periods to three-year periods) as well as automatic renewals, mostly on private companies’ risk.

“We’re back to a space where carriers need to prospect and show the added value, because they need to grow their business,” she says.

The result is the that the industry is seeing increasing exposures, but the rate is no longer keeping up with those exposures, said Michael O’Connor, assistant vice president, tech/cyber and professional lines at Sovereign Insurance.

He added rate adequacy is not quite as high compared to the last two or three years.

“There’s no shortage of capacity and if the profitability is there, companies are going to want to continue to grow that line of business,” he said. “It’s really a balancing act between picking the correct risks and maintaining that profitability in a rate environment that is not moving upward as quickly as it has in the past.”


Feature image by