Market survey shows Canadian/U.S. D&O rates up by 29%

Tillinghast Towers Perrin’s latest annual survey of the directors and officers (D&O) liability market within Canada and the U.S. indicates that insurance rates for this particular class of cover rose year-on-year by an average 29% for 2001. This compares with an 11% increase the year prior.
The risk consultants attribute the jump in cost for D&O covers to the number of high-profile litigation actions taken against corporate directors with regard to "quality of financial reporting" the Enron investigation being a typical example. Not only prices rose, the survey results show that 55% of the Canadian respondents had received significant renewal premium increases. About 34% of the respondents reported that their rates had not changed while 11% benefited from decreases. The consultants say that last year’s rate hike is the strongest since the liability crisis of the mid-1980s. "Current conditions do not signal that there is a crisis in the market. However, claim severity trends are likely to continue, given the large number of D&O litigation cases outstanding," says Mike Lombardi, head of Tillinghast in Canada.
The Tillinghast survey is based on feedback from 2,130 companies in the U.S. and 93 companies in Canada. The survey revealed that, while 97% of the U.S. companies represented within the survey carried some form of D&O cover, only 80% of Canadian companies had D&O insurance.