February 8, 2005 by Canadian Underwriter
In its “market survey” of directors’ and officers’ liability coverage outside the U.S. market, broker Willis says by the end of 2004 there was “good news” for buyers in terms of increasing competition in the marketplace.
While insurers started off 2004 “nervous” as a result of some high-profile D&O losses in recent years, by the second quarter signs indicated a leveling-off of premiums from non-US carriers, including Lloyd’s and the Bermuda market.
At the start of 2005, 61% of carriers said primary rates had dropped off in the past three months, and 69% predict rates will decrease further in the next three months. In the excess layer, rates had dropped 11%-25% on average in the last three months, according to 46% of respondents. And 75% predict further excess layer rate declines in the next three months.
While the level of coverage offered was seen as relatively static over the past three months, 38% of insurers say there is some movement afoot towards broadening coverage in the next three months, compared with 24% who see coverage levels decreasing.
Limits had also remained static over the last quarter, but 46% say coverage levels will increase by up to 10% in the next few months.
Willis says its experience echoes the responses of insurers and says organizations may look to increase their coverage levels by buying back cover which may have been removed by exclusions or by buying back limits. “Where premium rates are already competitive we have looked to enhance cover in other ways improving automatic acquisition thresholds, reducing excesses, increasing investigation costs which are usually sub-limited and removing any specific exclusions sensitive to a clients’ exposure.”