D&O market finally starting to harden: A.M. Best

For the first time in years, the D&O market is showing sure signs of hardening, A.M. Best reported.

Reporting from the Professional Liability Underwriting Society (PLUS)’s Symposium in New York, BestWeek’s Meg Green interviewed Eric Anderson, chief executive officer of U.S. retail for Aon, on the state of the D&O market.

Anderson pointed to macro trends affecting the market, including low interest rates, poor return on equity and increasing loss ratios.

But, at the same time micro pressures exist that will prolong soft market conditions, he added. These micro pressures include abundant capacity in the marketplace and a tough economic environment that limit insurance purchasers’ budgets.

“So, you have the macro moves and micro pressures, but as we see it right now in February, the macro moves are winning.”

A key indicator of a firming marketplace is what Anderson referred to as products in the “new to me” category,” BestWeek reported.

“[The product is] not necessarily new to the market, someone has it as a renewal, but it’s new to the other market that sees it. So, there’s always been in the market a dichotomy on pricing,” Anderson said.

“They want to push rate for their existing business. But, when it’s new to them, they want to price it more competitively than the incumbent. As long as that gap exists, you see a soft market. For the first time in the fourth quarter [of 2011] we were actually seeing that gap narrow where people were pricing it in a similar fashion.”

The complete report can be viewed at: http://www.ambest.com/media/MA.asp?vid=plus212