December 18, 2009 by Canadian Underwriter
Pricing for directors’ and officers’ liability insurance decreased 2.7% in 2009 Q3 compared to the rates seen in the same quarter of 2008, according to Aon’s Q3 Quarterly D&O Pricing Index.
In Standard & Poor’s financial institutions (FI) sector, D&O pricing for the previous four quarters showed double-digit increases, but only a 3.2% increase in 2009 Q3.
This reflects a 39% drop from its highest point in 2003, Aon reports.
D&O pricing for all remaining S&P industry sectors was down an average of 4.9% in 2009 Q3, according to the Index.
“D&O claims and pricing tend to move in the opposite direction of the financial markets,” according to Aon.
“When a company’s stock is doing well, shareholders are typically content. Thus, as the stock market has recovered this year, the frequency of claims has slowed.”
One hundred and thirty federal securities class action lawsuits were filed during the first three quarters of 2009. Forty-nine of them were related to the credit crisis.
This is a 20% decrease from the same period in 2008, where there were 163 filings.
“The decreasing number of claims may signal an end to the litigation explosion for financial services firms,” says Mike Rice, national practice leader of Aon’s Financial Services Group and author of the Quarterly D&O Pricing Index. “In 2010, we expect the market for D&O coverage to continue to soften for financial institutions as well as most of the other industry sectors.”